UK: Besso Limited Fined By The FCA For Anti-Bribery Systems Failings

Last Updated: 7 April 2014
Article by Adam Greaves

The FCA recently published its final notice in relation to action it has taken against insurance broker Besso Limited for a failure to take reasonable care to establish and maintain effective systems and controls for countering the risks of bribery and corruption.  The FCA fined Besso Limited £315,000, a discount of 30% of the amount that it would otherwise have been because Besso agreed to an early settlement.  It seems that Besso did not take heed from the fines the FSA (as the FCA then was) levied on Aon and Willis in 2011.  We blogged on the fine imposed on Willis  here

Summary of Reasons 

  • Besso failed to take reasonable care to establish and maintain effective systems and controls for countering the risks of bribery and corruption associated with making payments to parties who entered into commission sharing agreements with Besso or who assisted Besso in winning and retaining business.
  • The involvement of UK financial institutions in corrupt or potentially corrupt practices undermines the integrity of the UK financial services sector it is the responsibility of UK financial institutions to ensure that they are not involved in, or associated with, financial crime.  Unless firms have in place robust systems and controls which govern the circumstances in which payments made be made to third parties and then ensure those systems and controls are followed, they risk leaving themselves open to involvement in corrupt practices or actions contravening UK or overseas anti-bribery laws.  This action supports the authorities operational objective of protecting and enhancing the integrity of the UK financial system.
  • The failings at Besso continued throughout the relevant period (14 January 2005 to 31 August 2011) and contributed to a weak control environment surrounding the making of payments to third parties.  This gave rise to an unacceptable risk that payments made by Besso to third parties could be used for corrupt purposes, including paying bribes to persons connected with the insured or public officials.  In particular Besso:
  • Had limited bribery and corruption policies and procedures in place between January 2005 and October 2009.  It introduced written bribery and corruption policies and procedures in November 2009 but these were not adequate in their content or implementation.
  • Failed to conduct an adequate risk assessment of third parties before entering into both business relationships.
  • Did not carry out adequate due diligence on third parties to evaluate the risks involved in doing business with them.
  • Failed to establish and record an adequate commercial rationale to support payments to third parties.
  • Failed to review its relationships with third parties in sufficient detail and on a regular basis to confirm that it was still appropriate to continue with the business relationship.
  • Did not adequately monitor its staff to ensure that each time it engaged a third party an adequate commercial rationale had been recorded and that sufficient due diligence had been carried out.
  • Failed to maintain adequate records of the anti-bribery and corruption measures taken on its third party account files.

Justification for a significant penalty

The FCA considers that Besso's failings merit the imposition of a significant financial penalty and consider these failings to be serious for these reasons:

  • The failings continued throughout the relevant period and had they not been identified by the FCA, Besso may not have sufficiently identified the failings itself.
  • Besso's failure to implement effective systems and controls commensurate to the nature of its business resulted in payments being made to third parties without adequate challenge.  Besso's failure to do so meant that they did not adequately consider the risk of bribery and corruption prior to making payments to third parties.
  • In the context of the size of Besso's business the revenue it earned from business introduced by third parties is significant.
  • During the relevant period the FCPA published a number of communications to the industry making clear the importance of firms countering the risks of bribery and corruption with effective controls, including publication of its interim findings from a thematic review of how commercial insurance broker firms in the UK were addressing the risks of becoming involved in corrupt practices such as bribery in September 2009 and its full report in May 2010.  The FCA also published enforcement cases against two institutions for shortcomings in their bribery and corruption systems and controls.  Notwithstanding these communications, there remains deficiencies in Besso's policies and its implementation of its policies until August 2011.  The FCA did not find evidence to suggest that Besso's conduct was deliberate or reckless, and acknowledges the firm did increase its efforts to address bribery and corruption risks as time went on.  Nevertheless it should have taken additional steps to implement appropriate procedures on a timely basis and to monitor the adequacy of its procedures once implemented.

Besso's approach to dealing with bribery and corruption risks remained inadequate even after two visits by the FCA to inspect its relevant systems and controls.  The FCA acknowledges that Besso carried out significant work to address the issues identified but considers that Besso had not taken sufficient steps to remedy its shortcomings, and the speed at which Besso made improvements to its systems and controls, once the failings were identified, was not satisfactory.

Comment

This is an example of a company which had made some limited efforts to implement anti-bribery and anti-corruption rules and procedures, but overall the efforts were considered to be inadequate.  Whether this was because Besso had only adopted a halfhearted attitude to its compliance systems and controls, or whether it had misunderstood what its obligations were, is not clear from the report.  Either way, it suggests that corporates are not engaging with their specialist advisers early enough.  This may in turn suggest that some corporates are not committing sufficient time and financial resource to the task.

However, as we have said in previous blog posts, those companies which are regulated i.e. in the financial services sector, by the FCA are at risk of a "double whammy" because they are at risk of being inspected (as Besso was here) to find out whether the systems and controls match those required by the FCA, but the company can also be referred to the SFO or some other prosecuting body if an offence is discovered, which may lead to a prosecution and court-imposed fine on top of any administrative fine levied by the FCA.

The Besso case reflects our own experience that there are still many small and medium sized companies who have still not taken, four years after the Bribery Act was enacted, the far-reaching provisions of the Bribery Act sufficiently seriously.  Some have made a halfhearted effort, like Besso, and will come unstuck if they are investigated at a later date.  It is unarguably cheaper in terms of both money and management time to undertake a robust compliance program than to become involved in a protracted investigation and prosecution as well, which can last years and create reputational and financial damage.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions