Management clinic- anti-bribery: Don’t slip up

As with many aspects of Financial Services Authority regulation, the key to this one is a proportionate response. Because your firm does not seek overseas business - using third parties to introduce or secure it - you could be excused for thinking that it does not apply to you at all if you read the FSA report. You need to look at the bigger picture, though.

If you look at the FSA's round-up for smaller firms for May 2010, it refers to the report and states: "Although focused on firms involved in the commercial insurance market, the examples of good and poor practice included in the report will be of interest to firms operating in other sectors that use third parties to win business. You should consider the report's findings and the examples of good and poor practice. Where necessary, you should implement and maintain more effective and appropriate controls."

What this issue triggers is a review of a number of your behind-the-scenes procedures, all of which ultimately feed in to the doctrine of Treating Customers Fairly. For example, do you or any of your senior people take advantage of invitations to race days, Premier League football from the corporate box or a visit to the opera? Do you receive ‘free' training for your staff from insurers as any sort of inducement to
place business with them?

No one is saying that you should not accept these opportunities; in my broking days I was lucky enough to visit a number of Premier League grounds to watch Southampton courtesy of insurers. However, these days it is prudent to record these events in terms of who went and what the relationship is with the provider of the benefit.

In short, you need to look at the potential conflict of interest, assess it and be able to demonstrate if asked that you have done all that, and that there has been no client detriment as a result of the activity.

Status
Again, if you are paying or are asked to pay money to an introducer or influencer of business to your company, you must check the status of this person or firm. In the FSA paper, reference was made to employees being paid up-front expenses in cash when visiting certain foreign countries, the justification being that cash machines or access to local currency was restricted and this was a prudent way of keeping the employee solvent.

The risk of abuse here is obvious. On a local basis, cash transactions with introducers are to be avoided, with any payments both justified and clearly demonstrable within your accounts.

Do not forget your appointed representatives, should you have any, because they are a potential source of weakness to your compliance regime. You should be able to produce records to show why they were appointed, how they will introduce and the type and volume of potential introductions. You need to demonstrate that you have practised due diligence by undertaking referencing such as a Companies House check, viewing the representative's annual accounts and the basis on which a commission split was reached. This is all sound practice and will demonstrate to the regulator that you are on the ball.

If this situation is troubling you, consult your compliance consultant to review the related areas. In addition to those highlighted, these will include your policy towards proceeds of crime, data security, staff vetting and your policy in respect of accepting cash as payment of insurance premiums.

Ian Richie, director, RWA Group

Source: Professional Broking – July/August 2010