Anti-Bribery Compliance: Hiring Practices

Whether it be under growing series of practices associated with the FCPA’s anti-bribery provisions, the UK Bribery Act, Canada’s CFPOA, Australia’s Criminal Code, Brazil’s Clean Companies Act, or other anti-bribery regimes, consideration must be given to hiring practices as a part of any anti-bribery compliance program.  The practices in question must not be limited to traditional considerations as to an individual’s background, credentials, and reputation. All are part of fundamental due diligence with any organization.

Still other considerations need to be subject to review and oversight such as where an individual is placed and the risks in terms of responsibilities associated with that position.  Is he or she capable of handling the risks?  Strength of character, maturity, and requisite experience may be among the many factors requiring consideration.  Potential conflicts of interest are yet another consideration.  But in the context of anti-bribery legal regimes, the relationships of the those being hired may require special consideration as evidenced in the resolution of cases involving “princelings,” that is, the hiring of relatives of customers that may also be government officials.

But regardless of whether hiring practices are part of an anti-bribery compliance program, the Securities and Exchange Commission (SEC) has found hiring practices to constitute an integral part of internal controls.  In its resolution with BNY Mellon, internal controls violations were found with BNY Mellon’s hiring of “princelings.1  The SEC determined that BNY Mellon had “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.”2

Whether in the context of adequate internal controls or the implementation of an effective compliance program, more than traditional considerations need to be kept in mind in terms of hiring practices.  These same considerations also need to be kept in mind in the retention of third parties to act on an entities behalf.  Improper inducements can take many indirect forms.

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1Order Instituting Cease-and-Desist Proceedings, at ¶ 14, In the Matter of The Bank of New York Mellon Corporation, SEC Administrative Proceeding No. 3-16762 (Aug. 18, 2015)

2Id. at ¶ 27.

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