Anti-bribery and Corruption Systems and Controls in Investment Banks

The Financial Services Authority (FSA) has published the findings of its thematic review into anti-bribery and corruption (ABC) systems and controls in investment banks.

In response to those findings, the FSA will consult on proposed amendments to the FSA’s regulatory guidance, ‘Financial crime: a guide for firms’. This proposed new guidance applies to all firms within scope of our financial crime rules, not just investment banks.

From August 2011, the FSA visited 15 firms, including eight major global investment banks and a number of smaller operations, to examine how firms mitigate bribery and corruption risk.  Bribery and corruption risk is the risk of the firm, or anyone acting on the firm’s behalf, engaging in bribery and corruption.

The FSA found that, despite a long-standing regulatory requirement to mitigate financial crime risk, the majority of firms in the sample had more work to do to implement effective anti-bribery and corruption systems and controls. In particular, it found the following common weaknesses:

  • most firms had not properly taken account of our rules covering bribery and corruption, either before the implementation of the Bribery Act 2010 or after;
  • nearly half the firms in the sample did not have an adequate ABC risk assessment;
  • management information on ABC was poor, making it difficult for the FSA to see how firms’ senior management could provide effective oversight;
  • only two firms had either started or carried out specific ABC internal audits;
  • there were significant issues in firms’ dealings with third parties used to win or retain business;
  • though many firms had recently tightened up their gifts, hospitality and expenses policies, few had processes to ensure gifts and expenses in relation to particular clients/projects were reasonable on a cumulative basis.

The FSA is considering whether further regulatory action is required in relation to certain firms in its review.

Click here to download the full review: