October 07, 2019
Government Investigations & White Collar Defense Alert
Author(s): Isabelle De Smedt, Mark Knights, Michael Strauss
The Securities and Exchange Commission (SEC) recently announced a nearly $6.5 million settlement to resolve allegations that a major bank’s hiring practices in the APAC region violated the Foreign Corrupt Practices Act (FCPA). Here is what you need to know.
The SEC alleged that the bank’s APAC operations used relationship hiring practices to gain business advantage with government and non-government clients and prospective clients. On multiple occasions, APAC executives purportedly received requests from client contacts to hire individuals into the bank’s internship programs or for permanent positions. According to the SEC, senior bankers recognized the business opportunity associated with these requests, and many—if not all—of those business opportunities were realized after the relationship hires were made. Most of the business success the SEC tied to those hiring practices was with state-owned or controlled entities.
On paper, the bank had it right. Under the FCPA, businesses are prohibited from providing, with corrupt intent, anything of value to foreign officials to gain or retain business advantage. “Anything of value” is broadly construed and encompasses a wide range of monetary and non-monetary considerations. And the bank appropriately accounted for such broad-sweep, including, among other things, “internships and offers of employment within the definition of ‘anything of value’” as part of its anti-corruption policies and prohibitions.
But in practice, the SEC believed that those prohibitions were ignored, even by the bank’s compliance personnel. Indeed, the SEC highlighted multiple instances of relationship hiring practices, allegedly deployed as part of efforts to obtain and retain business from state-owned and private businesses in APAC, that it believed ran afoul of the bank’s own anti-bribery and corruption policies and the FCPA. Examples described in the SEC’s order included China and Korea bankers pushing for hiring unqualified candidates solely for the purpose of the business opportunities with state-owned enterprises and private business resulting from that hiring. These practices persisted even in the face of the bank’s own internal scrutiny of, and tightened compliance around, its hiring. But as reports surfaced about competitors under investigation for similar conduct, the bank finally clamped down and self-reported its relationship hiring misconduct to authorities.
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