Hong Kong has become one of the most corruption-free nations in the world. The Transparency International 2022 Corruption Perceptions Index (CPI), the most widely used global corruption ranking system, lists Hong Kong as the 12th most ‘clean’ nation out of 180. The system measures how corrupt a country’s public sector is perceived to be, according to experts and businesspeople.
Since its establishment in 1974, Hong Kong’s Independent Commission Against Corruption (ICAC) has driven a three-pronged approach of law enforcement, prevention and community education. This approach has seen Hong Kong consistently work against corruption and bribery while actively promoting ethical business behaviours.
The Prevention of Bribery Ordinance (Cap. 201) (POBO), enacted in 1971, is the primary anti-bribery legislation in Hong Kong enforced by the Independent Commission Against Corruption (ICAC). It contains provisions prohibiting bribery in both the public and private sectors.
Under the POBO, offering, soliciting or accepting an advantage by a government official/public servant (public sector) or an agent/employee (private sector) is considered an offence.
Section 4 and Section 9 of the POBO address the criminal nature of bribery of and by public officials and private individuals, which is not limited to monetary forms, but rather what the POBO defines as an “advantage”.
Outside of monetary bribes, gifts, entertainment, and hospitality can be perceived as creating an “advantage”, and in some cases, be explicitly defined as bribery.
Whenever an associate, third party, or member of the public thinks an employee is being unduly influenced in their decisions and actions (either now or in the future), it can create perceived conflicts of interest. Even when no actual conflict of interest occurs, the perception can still expose organisations to regulatory scrutiny and reputational damage.
Your GEH policies should provide clarity and direction on when employees can or cannot accept gifts and dollar values of what they can accept. The maintenance of a central register also makes it easy for employees to declare GEH items - and for your compliance team to track these activities.
MCO’s Gifts, Entertainment and Hospitality (GEH) module offers a comprehensive way to monitor employee gifts, meals, entertainment, travel and hospitality activities, allowing firms to record and detect risks arising from gifts and entertainment. It will enable your firm’s policies to be embedded with a rules-based approach to identifying potential misconduct and bribery risk.
Download your Gifts, Entertainment, and Hospitality Compliance brochure for more information.
Banks and financial services firms must have robust governance and internal controls to achieve their growth goals, sustainable operations, and value to customers, investors, and communities. However, corruption and bribery create severe risks of financial, operational, and reputational damage to firms. This type of unethical behaviour can also erode the trust of customers and stakeholders.
Firms must be proactive in working against corruption and bribery to uphold the integrity of the banking industry and their reputations. Anti-corruption measures that banks can take include:
This Guide contains practical guidance on anti-bribery legislation, effective corporate governance elements, anti-corruption measures that AIs can undertake, and the corruption risks and safeguards that AIs should be aware of within their core operations. Risks can include the management of bank accounts, credit facility and loan services, sales process and wealth management, procurement, and staff administration. The Guide also covers common corruption loopholes in firms’ core operations with recommended control measures.
Download the ICAC Anti-Corruption Guide for the Banking Industry.
Additionally, the ICAC continues its focus on providing insurance companies with tailored advisory services and training. In collaboration with the Insurance Authority and trade associations, the “Integrity for Success” Ethics Promotion Campaign has been launched to keep insurance firms, intermediaries, new joiners, and policy-holders updated and informed with useful resources and corruption prevention advice.
See the Integrity for Success website for further information.
The Hong Kong Business Ethics Development Centre (the Centre) also provides free consultancy services to help firms implement and maintain the necessary ethical business programs to reduce their risk of corruption.
Additionally, the HKMA’s Supervisory Policy Manual (SPM) module CG-3 “Code of Conduct” provides AIs with clear guidelines of the HKMA’s expectations of the code of conduct (including ethical business values, conflicts of interest, and use of information) that AIs should follow to actively work against corruption and bribery and unethical behaviour.
See the MyComplianceOffice (MCO) in-depth article for ideas and insights on How to Manage Connected Persons and Personal Relationships.
Under the SPM updates, AI employees must declare when they become aware that they, or their connected persons, have performed any role or taken any action that poses a risk of creating a conflict of interest for that employee.
Other updates to the SPM have been made with the intention to:
Two recent cases of the ICAC taking decisive action against corruption serve as stark reminders of the financial, reputation, and personal consequences that can arise for firms that fail to protect themselves against instances of corruption and bribery.
In 2017, the ICAC and SFC mounted their first reported joint operation to pursue potential breaches under the Prevention of Bribery Ordinance (POBO). As a result, executive directors of Hong Kong-listed financial advisory firm Convoy Global Holdings Limited were arrested, and eight properties were raided.
Financial and reputational damage to Convoy swiftly followed, with the company’s share price falling 7% following the raids. Convoy was subsequently forced to request a halt to trading its shares on the Hong Kong Stock Exchange (HKEx).
The second of these trials saw the conviction of former CEO Mark Mak Kwong-yiu, former CFO Christie Chan Lai-yee, former manager Wong Shuk-on and broker Lee Yick-ming. The four were found guilty of conspiracy of charges to defraud the company and the HKEx, and sentenced in October 2021 to between four and seven months in prison each.
The ICAC released an announcement in August 2022 of the arrest of 30 individuals for alleged corruption over the awarding of works, material supplies contracts, and related administrative and financial arrangements.
The giving and receiving of bribes totalling HK$5 million are alleged to have taken place concerning the awarding of works and material supplies contracts, as well as administrative and financial matters associated with the 3RS Project. In addition, bribery payments were allegedly deposited into the bank accounts of the arrested Principal Manager over the course of several years, with family members assisting in depositing some of the payments. To date, 10 people have been charged in 5 cases over the matter.
See the latest release about this case for more information.
In light of the overwhelmingly positive response to training and courses supplied over the years, ICAC is now looking to consolidate its resources and facilities to set up an International Anti-corruption Academy, Hong Kong (the Academy).
As ICAC commissioner Woo Ying-ming explains in an interview with Sing Tao Daily, “We are now reallocating our internal resources and training equipment for the proposed construction of the Hong Kong International Anti-Corruption Academy.
“The Academy will serve four purposes. The first is to provide members of overseas anti-graft agencies with training courses, through which they will learn about the efficient work by Hong Kong and China in combating corruption.”
As an additional outcome of the Academy plans, the ICAC hopes to raise its global integrity perception and positively impact reporting Transparency International 2022 Corruption Perceptions Index.
The ICAC’s three-pronged approach of law enforcement, corruption prevention, and education is key to safeguarding Hong Kong’s probity environment. However, it is just as critical for firms to stay a step ahead of unethical behaviour, corruption and bribery.
Banks and financial firms can further protect their interests by leveraging technology to monitor and reduce conflicts of interest, support ethical business dealings, and ensure regulatory compliance throughout the organisation.
The MyComplianceOffice (MCO) Anti-Bribery and Corruption solution comprehensively addresses the challenges of ABC through our “Know Your Employee” and “Know Your Third Party” compliance suites. These powerful suites help compliance teams manage data collection and facilitate workflow, communications, alerts, approval, reporting and record-keeping for critical regulatory compliance tasks.
Download your Anti-Bribery and Corruption solution brochure for more information.
Performing due diligence is critical for all firms before contracting with a service provider. However, as seen in the HKIA Third Runway case, monitoring ongoing contracts, activities, and financial arrangements is just as important.
But the key to effective risk management is an ongoing follow-up process to ensure the controls at the start of the relationship remain in place over time - and change as necessary to manage new risks. MCO’s Know Your Third Party (KYTP) risk management module automates the end-to-end process to reduce the complexity of managing third-party contracts and relationships, and significantly reduce the risk of corruption and bribery through vendor and third-party activities.
Download your Anti-Bribery and Corruption solution brochure for more information.
MCO’s Gifts, Entertainment and Hospitality (GEH) module also delivers a robust solution for monitoring employee gifts, meals, entertainment, travel and hospitality activities, allowing firms to record and detect risk within declared gifts and entertainment. It will enable your firm’s policies to be embedded with a rules-based approach to identifying potential misconduct and bribery risk.
Download your Gifts, Entertainment, and Hospitality Compliance brochure for more information.
MCO brings the only fully integrated, comprehensive compliance management platform that uses a global company and security master dataset to identify conflicts across firm transactions (deals, research, and trades), employees, and third parties.
Access your Integrated Compliance Management brochure now to learn how your firm can reduce the time, effort, and costs associated with mitigating risk and upholding regulatory compliance.
Or book your no-obligation demonstration of MCO’s award-winning regulatory compliance management platform.