Newly released thematic review finds weaknesses in systems and controls across the sector The UK Financial Services Authority (FSA) has declared that most investment banks still do not have adequate anti-bribery and corruption controls despite the Bribery Act being enforced almost a year ago. The regulator published the findings of its thematic review into such systems and controls in investment banks on March 29. The study was conducted from August 2011 onwards; the FSA visited eight major global investment banks and seven smaller institutions to examine how they mitigate bribery and corruption risk. The FSA concluded that "the investment banking sector has been too slow and reactive in managing bribery and corruption risk". Common weaknesses included not carrying out specific internal audits, not having an adequate risk assessment, and not properly taking into account the FSA's rules covering bribery and corruption. "Although we were frequently told about high expected standards of ethics and ‘zero tolerance' of bribery and corruption, most firms had historically failed to ensure adequate systems and controls to identify, manage and control the bribery and corruption risks to which they were exposed," the regulator said. Richard Indge, a London-based partner in Ernst & Young's fraud investigation and dispute services practice, believes companies need to prioritise these controls to keep up with the constantly changing regulatory landscape. "Risk assessments are a key tool in understanding the anti-bribery and corruption risks faced by a business, and must be regularly reviewed and updated as external and internal bribery and corruption risks change," he explains. Indge also predicts companies that ignore the threats posed by third parties will risk severe penalties. "Following the introduction of the Bribery Act, companies must have adequate procedures in place to address third-party risks – including outsourced business or partners," he says. "If they are not compliant, companies can be fined or executives imprisoned. We have already seen some large fines levelled at insurers over anti-bribery and corruption systems and control failings, and, given the new penalty regime, we would expect the level of fines to increase." This echoes a speech made by director of the Serious Fraud Office Richard Alderman at the International Bar Association annual conference in Paris on March 14. "The cases that we are looking at are the biggest and most complex, and so will take time to develop, but it will not be too long before we see court activity," he insisted. "The impact of this will be considerable. I am very optimistic about this. Enforcement activity under our Bribery Act will make a real difference." So far the only case brought forward under the Bribery Act – which was enforced on July 1, 2011 – was the prosecution of a clerk at Redbridge magistrates' court who had been accused of accepting £500 to remove a traffic penalty from a database....
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