Under Section 9(1) of the Prevention of Bribery Ordinance (POBO), it might be an offence for the senior bank manager (i.e. an agent, as an employee of the bank), without the permission of his principal (i.e. the bank), to accept advantages (i.e. expensive gifts offered by the client) as rewards for assisting the client to secure extension of loan repayment.  The client might also violate Section 9(2) of POBO for offering bribes.

The senior bank manager might have also contravened Section 124 of the Banking Ordinance which prohibits any employee of an authorized institution to receive any gift, commission, advantage etc. for his own personal benefit, for procuring or endeavouring to procure for any person any advance, loan, financial guarantee or credit facility from that institution.

For efficiency purpose, bank managers are often delegated with authorities to endorse certain loan-related applications up to certain limits. The risk of corruption is in proportion to the discretion which bank managers are allowed to exercise. The greater the discretion, the higher the corruption risk.

The restructuring of distressed loans is a corruption-prone area which is easily overlooked. A desperate debtor could entice the bank manager to secure favourable credit terms, e.g. extension of credit facilities.

Corruption in the lending function will result in an increase in bad loans, affecting the bank’s business and profitability.  When a customer is willing to bribe for favour in credit approval, it reflects both the underlying financial problems of his business and his poor integrity. His chance of defaulting repayment will be high. An internal review of the case will unearth the impropriety and corruption dealing. With a stringent control mechanism of a bank and a whistle-blowing mechanism, there is a good chance that the corrupt dealings will be detected.

In this case, the relationship manager, an employee (agent) of the bank (the principal), without the permission of the bank, accepted monetary bonuses (advantages) from the acquainted client as a reward for his preferential service in managing the investment portfolio (an act in relation to the bank’s business). The relationship manager might violate Section 9(1) of the Prevention of Bribery Ordinance (POBO) for accepting bribes; whereas the acquainted client might contravene Section 9(2) of the POBO for offering bribes.

The personal relationship between the relationship manager and the acquainted client would give rise to conflict of interest, which was conducive to favouritism towards the customer, e.g. providing first priority in the investment portfolio management.

To prevent corruption and malpractices, banks should enhance the awareness of integrity among staff members and promote ethical culture by:

• disseminating a clear message by top management on commitment to business ethics and integrity, and zero-tolerance to unethical practices;

• specifying the integrity standard expected of all staff members in a Code of Conduct, in particular, the restrictions on acceptance of advantages from bank customers, and the requirement for staff to declare and avoid conflict of interest.

It is also necessary to conduct regular (induction, refresher) staff trainings on integrity and anti-corruption and to communicate with customers, including non-local customers, about the bank’s policies on anti-bribery and acceptance of advantages policy.

In this case, the senior credit manager, an employee (agent) of the bank (the principal), without the permission from the bank, accepted an advantage (a watch) from factory owner as a reward for turning a blind eye to the out-dated equipment and giving him a favourable site inspection report (an act in relation to the bank’s business). Although the acceptance of gifts took place outside Hong Kong, part of the bribery act occurred in Hong Kong (e.g. submission of a favourable report to the bank). The senior credit manager might breach Section 9(1) of the Prevention of Bribery Ordinance (POBO) for accepting bribes, whereas the factory owner might contravene Section 9(2) of the POBO for offering bribes. The senior credit manager might have also contravened the Banking Ordinance.

Although the senior credit manager was the supervisor of the credit manager, he did not have the authority to permit his subordinates to accept the advantage.

It is very common for banks’ corporate clients to have their business operations such as production plants or other assets in the Mainland or elsewhere outside Hong Kong. When site inspection/ visit by bank staff is required in assessing a loan application, the staff members are exposed to significant risk of temptation, which may comprise bribes, gifts, and excessive entertainment or services.

In fact, assigning staff members of the same unit (in particular one of them is the supervisor of the other one) to conduct high corruption-risk tasks is a formula of disaster. The credit manager did not decline the gift offer at the spot probably because of the pressure from his supervisor, and might eventually be tempted to collude with his supervisor.

Due to the differences in various cultures, some customers from other regions may regard offering gifts/ rewards in return for assistance or favour as a common business practice.  Banks should make it clear to their staff members that it is unnecessary and inappropriate for bank staff members to adopt local cultures which may violate the laws.  Moreover, an independent, reliable and confidential channel of reporting malpractices should be established by banks to encourage whistle-blowing.  Furthermore, it is essential for banks to communicate clearly to all staff members and customers, especially non-local ones, about the bank’s policies on anti-bribery, acceptance of advantages / entertainment and zero tolerance to corruption.

The bank manager, an employee (agent) of the bank (the principal) and without the permission of the bank, accepted advantage from the client as a reward for helping the latter to perform suspicious transactions through the bank (an act in relation to bank’s business). The bank manager might contravene Section 9(1) of the Prevention of Bribery Ordinance (POBO) for accepting bribes, while the client might contravene Section 9(2) of the same Ordinance for offering bribes.

The bank manager might breach the Organized and Serious Crimes Ordinance or the Drug Trafficking (Recovery of Proceeds) Ordinance as well as the Anti-Money Laundering and Counter-Terrorist Financing Ordinance if he, knowing or having reasonable grounds to believe that any property which, in whole or in part, directly or indirectly represents any person’s proceeds of drug trafficking or indictable offence, deals with that property.

Money laundering is a serious crime.  Banks should make all staff members aware that the bank must comply with the laws and would constantly monitor fund transfers and audit the related control/processes, so as to provide a deterrent.

In this case study, the project manager, an employee (agent) of the bank (the principal), accepted an advantage from the Mainland contractor, as a reward for making a recommendation to the bank’s head office in Hong Kong to accept the contractor's substandard works and employ the same contractor to renovate other branches (an act in relation to the bank’s business and took place in Hong Kong), might contravene Section 9(1) of the Prevention of Bribery Ordinance (POBO). The Mainland contractor might also contravene Section 9(2) of the POBO for offering bribes. If any part of the act of bribery (including offering, soliciting or accepting a bribe) takes place in Hong Kong, it may still be pursued by the ICAC under the POBO.

Procurement of goods and services is one of the most corruption-prone business processes, in particular those involving high values or specialist knowledge and specialised products or services, e.g. renovation and maintenance works.

It is common for banks to send staff members to work in the Mainland office. The staff members are exposed to significant risk of temptation due to their perceived remoteness from the main office in Hong Kong and the absence of supervisory control measures. Relying on a single staff member, who is a specialist, without effective checks and balances and segregation of duties, also increases the corruption risk.

Banks should lay down guidelines for key procurement stages.  They should also assign supervisors to conduct site inspections to ensure compliance with the laid down guidelines and to detect malpractice, such as connivance of substandard performance of contractors. It is also important to circulate the staff code of conduct regularly to remind staff members to refrain from accepting frequent/lavish entertainment from contractors/suppliers which may otherwise affect one’s objective commercial judgment.  In addition, it is also advisable to communicate to suppliers/contractors, in particular non-local ones, on the bank’s policy regarding anti-bribery, acceptance of advantages/entertainment, zero tolerance to corruption and channel(s) for feedback/enquiry.

Edwin might breach Section 9 of the Prevention of Bribery Ordinance (POBO) if he, as an employee of his bank, without the approval of his employer (i.e. the bank), accepted an advantage (i.e. special commission from the sales representative) for buying an obsolete printer model from the sales representative. The sales representative might also breach the same provision of the POBO for offering the bribe as an inducement to Edwin for abusing his authority at work. 

Edwin was facing an ethical dilemma that might put his personal values such as honesty and responsibility to challenge. In handling situation like this, Edwin should identify the relevant facts and take stock of all stakeholders concerned. The following factors should be taken into consideration when identifying viable alternatives and choosing the best course of action:

1. Any violation to his professional, industry specific, or company code of conduct?

2. Is it against the Law?

3. Does it correspond with his self-values such as loyalty, honesty and responsibility?

4. Can he disclose his decision to others openly and honestly without misgivings?

To uphold his professional ethics and avoid breaking the law, Edwin should say no to the sales representative’s offer and report the matter to the bank or the ICAC.  He could also refer to the ETHICS PLUS ethical decision making model for solving his ethical dilemma and choosing the best course of action.

Peter might breach the Organized and Serious Crimes Ordinance or the Drug Trafficking (Recovery of Proceeds) Ordinance as well as the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. 

Peter also commits a corruption offence under Section 9 of the Prevention of Bribery Ordinance (POBO) for soliciting from Joe an advantage as a reward for leaking confidential information from his bank. He may also violate the Code of Conduct^[1] of his bank as he fails to preserve the confidentiality of the bank's internal information.

^[1] According to HKMA’s Supervisory Policy Manual CG-3, each authorized institute (AI) (bank) should develop its own Code of Conduct containing certain minimum conduct requirements which include “no member of staff should, during or after termination of his employment with the AI, except in proper course of his duties or with the written consent of the AI, divulge or make use of any secrets or of any correspondence, accounts, connections or dealings of the AI or its customers or of any knowledge gained in relation thereto during his employment.”

Bank employees are required to treat their customers' banking affairs as private and confidential.Cindy might violate the Code of Conduct^[1] of her bank for releasing customers’ information of her bank to a third party without their consent. Such a disclosure is also strictly prohibited in accordance with the Personal Data (Privacy) Ordinance (PDPO).

Cindy breached Section 9 of the Prevention of Bribery Ordinance by accepting an advantage, i.e. $1,000 for each set of data released to Fred. Fred in turn committed an offence of offering a bribe.

^[1] According to HKMA’s Supervisory Policy Manual CG-3, each authorized institute (bank) should develop its own Code of Conduct containing certain minimum conduct requirements which include “no member of staff should release customer information to a third party without written consent from the relevant customer, unless the release complies with the PDPO or he is required or permitted to do so by law.”

Terry breached Section 9 of the Prevention of Bribery Ordinance (POBO) as he abused his official position as a bank manager by expeditiously approving an application of overdraft facilities and solicited and accepted an advantage in return without permission from his employer. Likewise, Mark breached the POBO by offering an unlawful advantage to Terry. In this case, Terry also violated Section 124 of the Banking Ordinance.

Although the "under-the-table" deal had not been completed, Terry and Mark still committed an offence. Under the POBO, a person will be found guilty even though the purpose of bribery has not been achieved. Terry might also violate the Code of Conduct^[1] of the bank by soliciting and accepting personal benefits from a customer.

^[1] According to HKMA’s Supervisory Policy Manual CG-3, each authorized institute (bank) should develop its own Code of Conduct containing certain minimum conduct requirements which include “no member of staff should solicit, accept and retain personal benefits from any customer of the authorized institute (bank) or any individual or organisation doing or seeking to do business with it.”

Nelson and Leo breached Section 9 of the Prevention of Bribery Ordinance (POBO) as Nelson accepted advantages from Leo in the form of commission and free travel for providing assistance in approving Leo's L/C applications without the permission of the bank. It is also a violation of Section 124 of the Banking Ordinance for Nelson to accept the advantages. Nelson commits a corruption offence despite that Leo deposited the commissions into the account of Nelson's wife. Under the POBO, a person is considered to have accepted an advantage, even though another person acting on his behalf receives the advantage.

Nelson also could not excuse himself by explaining that the acceptance of the Chinese New Year trip is a customary practice as custom is not a defence according to the POBO. Nelson might further contravene the Code of Conduct^[1] of his bank for accepting personal benefits from a customer doing business with the bank.

Nelson’s acceptance of entertainment and free accommodation without doing anything at the early stage might not contravene Section 9 of the POBO at the outset. Nevertheless, Nelson should avoid accepting excessive levels of entertainment or advantages as it might affect his objectivity in dealing with Leo.

^[1] According to HKMA’s Supervisory Policy Manual CG-3, each authorized institute (bank) should develop its own Code of Conduct containing certain minimum conduct requirements which include “no member of staff should solicit, accept and retain personal benefits from any customer of the authorized institute (bank) or any individual or organisation doing or seeking to do business with it.”