Advice Matters – from the archive

Advice Matters is an accredited monthly e-journal. Each edition contains a number of articles written by industry experts, that combine knowledge and skills related topics, with technical and regulatory updates. Every edition is aligned to the ApEx standards, with a review at the end of each journal to show the learning outcomes and standards covered. (This is not available in the sample below).

Advice Matters will allow professionals to access 12 hours of structured CPD throughout the year from the comfort of their desk, or on the go using a mobile device. Each edition is also accompanied by associated questions and answers to help test and verify knowledge.

Take a look at a recent article from our Skills & Expertise section of Advice Matters that focuses on your personal development. The article provided below looks at the UK Regulation around bribery and corruption.

Personal Development is often forgotten or neglected, as it is not seen as important as the other areas of CPD. In reality it can be the aspect that makes the real difference to your clients and your earning capacity. In each edition of Advice Matters we will discuss potential development areas and ensure any Regulator focus that aligns to this area is covered in a very timely manner.


Open to Bribery and Corruption


The second week of December this year contained two dates of interest.  December 9th was the United Nations Anti-Corruption Day and December 11th saw the 31st anniversary of the release of the iconic 80’s movie, “Wall Street”.  Indeed, the following week sees the 5th anniversary of the release date for “The Wolf of Wall Street”.  There’s a theme here.  Perhaps it’s the thought of how much all those Christmas presents are going to cost that turns the mind to improving one’s financial situation.  Perhaps it’s US-led insomuch as after Thanksgiving everyone decides they’d like a little more to be thankful for.

As Gordon Gekko said in Wall Street 31 years ago, “The most valuable commodity I know of is information”.  He’d have stopped short of nothing to get the information he desired.  That information might have been the soon-to-be-announced divestment of an under-performing section in a large listed company. Perhaps the price at which a competitor is submitting a tender.  Or could it be enhanced commission rates that some investment providers are paying IFAs with whom they have a close relationship?  In any case, the information has value.  Value can drive greed (Gordon Gekko wouldn’t think this bad) but this can in turn drive behaviours which undermine the societies in which we live.

Let’s take an often emotive subject –children’s education – to consider the behaviours that greed can drive.  According to Transparency International (an organisation that fights corruption worldwide), a seven-country study in Africa found that 44 per cent of the parents surveyed had paid illegal fees for schools that were legally free for their children.  If you can’t afford the fee, your child doesn’t get an education and doesn’t escape poverty.  Then they can’t pay the fee for their children and so the cycle continues with the poorest among us trapped and exploited by those who benefit from this corruption.

This example dealt with relatively small sums so let’s look at something bigger.  The largest foreign bribery case in history.  The Brazilian construction company Odebrecht has admitted guilt in bribing officials across 12 Latin American countries to the tune of over £550m.  They even had a special department named the Division of Structured Operations, just to manage the budget for these bribes.  So far, this investigation has led to prison terms for more than 130 politicians and corporate executives.

But is Bribery and Corruption simply something that we have to accept as business practice in certain geographies?  Not the kind of thing that would ever be entrenched here in the UK?  Well, bribery itself may not be endemic however there are conflicting views on the volume of corruption.  The UK has recently been ranked as the 10th most honest nation in the world yet flagship corporations like Rolls-Royce have had record fines for admitting guilt spanning decades involving millions of pounds of bribes.  Nearly 10% of properties in Westminster are owned by overseas shell companies preventing us from knowing exactly who the ultimate beneficial owners are (at least until registers of ultimate beneficial ownership eventually come into being) – some argue these are the spoils of corrupt and unlawful activity.  At the time of writing, alleged corruption in the Leave.EU and separate, Vote Leave, campaigns during 2016 EU referendum threatens to call into question the legitimacy of the outcome.  Are we now a nation where our democracy, indeed our integrity, is up for sale where those with the most resources can buy elections?  The cynical among us may feel it’s always been that way but most of us still want to believe that we live in a country that is fundamentally just, rather than corrupt.

So, if we accept that corruption (or at the very least, the threat of corruption) is a very real issue on our home turf, what are we doing about it?  In 2010 the UK Bribery Act came into force to significantly strengthen the deterrents to would-be criminals willing to consider venturing outside the rules.  The first conviction however may not on first sight have all the high drama some would expect.  In 2011 a court administrative officer was jailed for three years for taking £500 to ‘lose’ details of a driving conviction, saving the offender points and additional costs.  The three years were to run concurrently with a six-year sentence for misconduct in public office.  The judge stressed that it was important that those who were tempted to “behave in this way” understood that there would be serious consequences for their actions.  Seems like the judiciary are very keen to protect the integrity of the system.

The UK Bribery Act provides for four offences:

  • bribing another person;
  • being bribed;
  • bribery of foreign public officials; and
  • the new corporate offence of failing to prevent bribery

The first three are all punishable by imprisonment of no longer than 10 years and an unlimited fine.  That can be serious enough for an individual but the fourth corporate offence is also punishable by an unlimited fine – something that should make executives across the UK take note and ensure their framework to prevent bribery is robust.

Of course, bribery is an offence that no amount of good corporate governance will ever completely eradicate but firms can no longer shrug and suggest that one bad apple is hardly their fault.  A firm must take appropriate, proportional and risk-based measures to demonstrate how it has implemented an environment that is hostile towards possible bribery and corruption – and this needs to be evidenced with actions as well as words.  No wonder that firms have ramped up their efforts to demonstrate effective controls – the cost of non-compliance far outweighs the cost of implementing controls.

Let’s stay with those first two offences and look in more detail at what the legislators are looking to achieve.  Bribing (active), and being bribed (passive), are committed when someone:

  • offers, promises or gives another (the offence of bribing), or
  • requests, agrees to receive or accepts (the offence of being bribed), a financial or other advantage in connection with a person performing a function “improperly”.

Improper performance of a function is one which breaches an expectation that the function will be performed in good faith and impartially.

What does this mean for you?  Well, let’s consider a few points:

  1. ‘financial or other advantage’ is quite a broad definition. We may genuinely like our clients, but most of us do what we do for some financial benefit.  Also, we like to have a little fun along the way so the nice lunch, tickets to see the rugby etc. all make things go along a little more comfortably.
  2. As a financial services professional we have a position of trust – we are expected to demonstrate the necessary skills, knowledge and expertise to provide good outcomes for our clients. We are expected to uphold ethical values and support regulatory objectives (integrity for one).  We are expected to ensure compliance with a whole host of requirements including for example timeliness of transactions and detailed checks on who our clients are and where their funds come from.

Do any of us want to take the risk of failing to meet the standards expected of us, knowing that we received financial advantage for dealing with our clients, while the provisions of Bribery Act strengthen the armoury of any prospective prosecutor?

If we consider now the third offence – bribery of foreign officials.  This is something with additional scrutiny by the government and is worthy of separate note.  The question asked is why couldn’t this be dealt with under the first offence?  The offences may be prosecuted if they take place in the UK or by someone with a close connection to the UK i.e. by a national or resident, and it’s worth noting this extra-territoriality.  The point is that this separate offence has an even lower threshold for prosecution than the first and should be seen as a commitment from the UK Government to play their role in the growing international focus on anti-corruption measures.  Who are these foreign officials? It can be any employee of a state-owned institution so it could be border guards, customs officials, health and safety inspectors – (not to be confused with PEPs!) all of which may be in a position to look the other way or speed up any process you find yourself embroiled in.  You may even ask yourself whether there is any crime committed if you pay a little extra to reach an outcome sooner than it might have, when the outcome is exactly the same… Sometimes you need to grease the wheels a little just to make things move along quicker, right?  And some official functions, for example embassies who review and approve (or otherwise) visas to visit countries even formalise this arrangement and allow you to pay a published fee in order to have a quicker turnaround of your paperwork, so where’s the harm in an unofficial scheme that does the same…

The term for these unofficial payments is Facilitation (or “grease”) payments.  The legislative view is that these payments, which are made to induce officials to perform routine functions they are otherwise obligated to perform, are in fact bribes.  They remain illegal under the Act even if they are permitted, or even expected, by local custom. This contrasts with the position in the US where, under the Foreign Corrupt Practices Act (FCPA) there is an exception for so-called facilitating payments. This permits companies to make payments for the purpose of expediting the performance of routine governmental actions, such as clearing goods through customs.  No such exemption applies under UK law.

In summary, the UK legislation is part of a growing international support to call out bribery and corruption, and to shine a spotlight into any of the murkier practices that fall below our expectations of just and fair practice.  Governments will seek to influence our behaviour through punitive actions on both individuals and corporations.  We hold a position of trust and must discharge our responsibilities diligently and competently, with regard to our being fit and proper to do so.  The world may not be fair, but we are expected and obliged to play fairly.  It is, ultimately, entirely within our own remit to protect ourselves and support wider efforts to provide a level playing field for all, where we win and retain business not through breaking rules, but through better performance, better engagement and better service.  Happy anniversary Gordon Gekko – see how the world has changed.

With the FCA also focusing on personal accountability at the senior level (and with the
quality of board packs the responsibility of directors), it is no surprise there is a demand
for higher standards.
So join us for this practical two-hour workshop. We’ll help you think like a regulator
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• Recognise common reporting problems and how to overcome them
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• Get guidance and templates to share with all contributors
• Compare examples of good and bad reporting
• Learn strategies for more timely creation and distribution of packs
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FSTP, ADvice Matter, Structured CPD

Hannah Gunthorpe

Open Course Coordinator