Rahman Ravelli | View firm profile
JP Morgan is paying $264M to settle allegations of bribery
over its hiring of children of key Chinese decision makers to try and secure
business. Aziz Rahman explains what constitutes bribery and how to prevent it.
United States prosecutors and regulators recently announced that
the bank JP Morgan and its Hong Kong subsidiary is to pay roughly $264 million
to settle allegations relating to large-scale bribery.
The allegations related to JP Morgan’s hiring practices in
China, where it employed children of Chinese leaders in an attempt to win
business. Some of the well-connected candidates employed were unqualified and
did the most basic tasks.
It is unlikely that JP Morgan was the only bank hiring
children of Chinese decision makers in order to secure deals. The US Securities
and Exchange Commission has indicated action against other banks is likely and
some have hinted that they may face investigation.
In its defence, JP Morgan had claimed that the hiring of
well-connected people was routine in China and that its actions fell into a
“grey area’’ regarding bribery.
But prosecutors argued that such employment was linked to
concluding deals with Chinese government-run companies; with hired candidates
each having a direct link to a business opportunity for the bank.
In dismissing the bank’s “grey area’’ argument, US Attorney
in Brooklyn Robert L. Capers, who helped lead the investigation, said: “The
common refrain that this is simply how business is done overseas is no defence.
This is no longer business as usual; it is corruption.’’
Mr Capers’ statement certainly backs up the widespread
belief that practices involving bribery and corruption, which may have been
ignored or tolerated in the past, are now likely to lead to prosecution. The
authorities worldwide are looking to eradicate bribery – and this is seen no
clearer than in the UK’s Bribery Act.
Under the Act, it is an offence for anyone to pay, receive
or request a bribe, either directly or indirectly, to have a relevant function performed
improperly. There is also an offence of using a bribe to influence a foreign
official to gain a business advantage.
A bribe, for the purposes of the Act, does not have to
involve money. It can be any kind of advantage, such as a gift, special
treatment or favours (which may have applied to what JP Morgan did had the
matter been prosecuted by UK authorities).
The bribe can also be in connection with a wide range of
activities: to secure or retain a contract, to gain a trading advantage over a
competitor or to receive favourable treatment when it comes to the issuing of,
for example, a health and safety certificate or permit.
Companies fall foul of the Act if a bribe has been given on
its behalf by an employee, agent or other party acting for it.
Under the Act, which came into effect in 2011, a company is liable
for the corrupt activities of all its representatives anywhere in the world;
from the most senior executives down to lower-level staff, agents and third
parties. Its punishments include unlimited fines and up to ten years’
imprisonment for individuals.
The bribery does not have to be carried out in the UK but
the person committing it must have a UK connection. Being a British citizen,
national, subject or resident or working on behalf of a company that trades in
the UK are all classed as a UK connection.
The scope and significance of the Act is huge. The only
possible defence to it is to argue to the authorities that you have done all
that you could have done to comply with the Act.
But this is not an argument that can be won simply by
claiming to have done what you could to prevent bribery. Such a defence is only
available to a company that has taken time and effort to introduce the most
appropriate compliance procedures. These procedures must take into account the
nature of the company’s business, where it carries out its business and all the
associated bribery risks.
areas where it trades, the business sectors in which it operates, its use of
third parties and agents, its trading partners and the local laws where it does
business must all be considered carefully if a company is to have any chance of
recognising all the potential for bribery.
Anti-bribery procedures must reflect all such factors and be
implemented, publicised, monitored and reviewed from the top down – they have
to be seen as a core part of a company’s way of working by all its staff and
associates. Such procedures must also cover all eventualities; for example, the
use and payment of extras such as facilitation payments and the scope of
Only then can a company argue that it did all it could to