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Fine for failing to manage corruption risks

The Financial Conduct Authority (FCA) has fined a UK company almost £1.8 million for failing to have appropriate controls and checks in place to guard against the risk of bribery and corruption when making payments to overseas third parties.

The failure breached principle three of the financial regulator’s principles for business, which requires firms to manage their business, and risks, responsibly and effectively.

The case in question concerns a company called JLT Specialty Limited (JLTSL), which provides insurance broking and risk management services. The FCA found that it had failed to conduct adequate due diligence before entering into relationships with ‘overseas introducers’ - partners in other countries who helped JLTSL secure new business.

JLTSL was also found to have failed to adequately assess the potential risk of new insurance business secured through its existing overseas introducers.

According to the FCA, the failings occurred between 19th February 2009 and 9th May 2012, during which time JLTSL received almost £20.7 million in gross commission from business provided by overseas introducers, and paid them over £11.7 million in return.

Inadequate systems around these payments apparently created an unacceptable risk that overseas introducers could use the payments made by JLTSL for corrupt purposes, including paying bribes to people connected with the insured clients and/or public officials.

JLTSL’s penalty was increased because of the company’s failure to respond adequately either to the numerous warnings the FCA had given to the industry generally or to the firm specifically. At the same time, as JLTSL agreed to settle at an early stage, the fine also qualified for a 30% reduction, resulting in a total fine of £1,876,000.

This enforcement action is interesting because it demonstrates once again the way in which corporate crime is being attacked through corporate governance processes. Companies cannot escape from the new reality that they must have adequate procedures in place to prevent instances of bribery and corruption.

Contact Jonathan Fisher QC

For specialist advice on issues of corporate, regulatory or financial crime, contact Jonathan Fisher QC on +44 (0)20 7427 463 or click here to make an electronic enquiry.

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The views expressed in this article represent those of the author and not Bright Line Law.

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