In terms of the FCPA, the implications of hiring of children of foreign officials, often referred to as “princelings,” have been subject to considerable debate. Recently, valuable internships for children of officials of sovereign wealth funds were the focus of the SEC’s settlement with The Bank of New York Mellon Corporation (“BNY Mellon”) for violations of the FCPA’s anti-bribery and internal controls provisions.1
In the findings of the administrative order associated with the settlement, BNY Mellon employees were found to have viewed the internships as important to keeping the business of sovereign wealth funds.2 Making internships available to children of foreign officials did not by itself constitute a violation of the FCPA. But the context was critical to determining there was a violation.
In finding internal controls violations, the order found BNY Mellon to have “few specific controls relating to the hiring of customers and relatives of customers, including foreign government officials. Sales staff and client relationship managers were permitted wide discretion in their initial hiring decisions, and human resources personnel were not trained to flag potentially problematic hires. Senior managers were able to approve hires requested by foreign officials with no mechanism for review by legal or compliance staff.”3
For the internships of children of officials of sovereign wealth funds, BNY Mellon applied different and far less rigorous standards than for other applicants to its existing internship program. Nor did these children “have the requisite academic professional credential for its existing internship programs.”4 The internships provided these children were significantly more elaborate and generous than the existing internship program. These factors combined with the quid pro quo nature of the exchanges between BNY Mellon officials and the officials of the sovereign wealth funds formed the basis of the violations of the FCPA’s anti-bribery provisions.
BNY Mellon’s resolution with the SEC does not hold that the FCPA prohibits the making of internships to relatives of foreign officials. Rather, if internships are contemplated, among the critical factors requiring consideration are whether the internship program is the same as a firm’s existing scholarship program; whether the applicants qualify under the rigorous standards of its regular internship program; whether any direct or indirect intervention by the relatives of the applicants is involved; and whether serious review by legal or compliance staff has taken place.
3Id. at ¶ 27.
4Id. at ¶ 20.
