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.

Sam might breach his bank's internal policy on credit control by abusing his authority to make a favourable recommendation disregarding the real state of George's business. Sam should not allow his personal relationship with George to affect his professional judgement. Rather, he should declare their relationship to the senior management before making a recommendation. To safeguard his own interests, he should keep the management well informed of the matter and abide by their subsequent decisions.

Laura might violate the Code of Conduct[1] of the bank by taking up a directorship outside the bank without her employer's prior permission. On this issue, her directorship in Ricky's company gave rise to a conflict of interest with her official duties, so she might have breached the bank’s Code of Conduct for approving facilities to the company in which she is interested. Moreover, she might commit an offence of conspiracy to defraud if she was aware of the fraud committed by Ricky and assisted him in the approval process.

[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 take up any directorship, employment or part-time commercial duties, whether paid or unpaid, outside the AI except with prior written approval as required by the Code of Conduct.” The Code should also require that “no member of staff should grant credit to himself, his relatives or companies in which he or his relatives have a personal interest.”

Adam might violate Section 9 of the Prevention of Bribery Ordinance (POBO) if he, as an employee of his company, without the approval from his employer, accepted advantages offered by Philip (i.e. the shares of his uncle’s new company) for turning a blind eye to the unqualified loan application.  Philip might also violate the POBO for offering bribes.

As an accounting professional, Adam should observe and comply with his professional code of conduct.  The Hong Kong Institute of Chartered Public Accountants (HKICPA) requires a professional accountant to comply with relevant laws and regulations, and avoid any conduct that the professional accountant knows or should know might discredit the profession.  Also, a professional accountant needs to comply with the fundamental principles of integrity and objectivity as stipulated in the HKICPA’s Code of Ethics for Professional Accountants which requires an accountant to be straightforward and honest in all professional and business relationships and avoid any conflict of interest situations.   

Meanwhile, Adam also needs to observe his company’s code of conduct governing loan applications.  He may consider report the attempted bribe to the management and to the ICAC.

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 honesty, compassion and responsibility?

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

Dicken could refer to the ETHICS PLUS ethical decision making model for solving his dilemma.

As far as professional conduct is concerned, Dicken, as a professional accountant, should observe the fundamental principles of integrity, confidentiality and professional behavior when carrying out his duties as a professional accountant. He might have breached the Code of Ethics for Professional Accountants for using confidential information for personal gain or for the financial gain of others. 

For legal compliance, Dicken might breach the Securities and Futures Ordinance if he, as a senior management of the listed company, had intentionally, recklessly or negligently disclosed unpublished price-sensitive information to Lawrence for the latter to deal in the company’s shares.

Dicken was regarded as an insider under the law because he was a person who, being the financial controller of Good Men Investment Co. Ltd, had access to and knowledge of certain information relating to the company which the public did not have and would have an impact on the price of the company’s shares. 

Dominic violates the *Codes of Conduct as well as the insider dealing provisions of the Securities and Futures Ordinance.  He commits an insider dealing offence because he has used non-public information, provided by an insider of Treasure Hunt, to purchase the company’s stocks for financial gain. Tony is regarded as an insider under the law because he is a person who, being the financial controller of Treasure Hunt, has access to confidential information relating to the company.

Tony and Dominic may also commit a corruption offence under Section 9 of the Prevention of Bribery Ordinance (POBO) because Tony accepts from Dominic a share of the profit from the insider dealing as a reward for leaking the confidential information  of  his  company  to  Dominic.    Tony  may  commit  an  offence  of accepting a bribe while Dominic may commit an offence of offering a bribe.

*Remarks: Codes of Conduct refer to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, the Code of Conduct for Corporate Finance Adviser and the Fund Manager Code of Conduct.

Jackson breaks the *Codes of Conduct by concealing his personal interest in Good Industrial and continuing to participate in the takeover project. It appears that his advice to Frontline Group is not entirely objective as his interest in Good Industrial may affect his judgement.  To comply with the standard, Jackson should disclose the situation to his company and let his employer decide whether he should withdraw from the project.

*Remarks: Codes of Conduct refer to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, the Code of Conduct for Corporate Finance Adviser and the Fund Manager Code of Conduct.

On this issue, Eddie should refrain from influencing Jacob to subscribe for the shares of Small World Corporation or, alternatively, disclose to Jacob’s clients the material interest of the company in this transaction.  However, Eddie errs by aiming only to evade the final responsibility of his company in buying the portion of stocks which cannot be absorbed by the market.  He has thus violated the *Codes of Conduct.   On the other hand, Jacob should not act in accordance with Eddie’s instruction unless the subscription is in line with the investment objectives of his clients.  He has breached the Fund Manager Code of Conduct in not performing his fiduciary duty.

*Remarks: Codes of Conduct refer to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, the Code of Conduct for Corporate Finance Adviser and the Fund Manager Code of Conduct.

Benny occupies a position which has access to the sensitive information on the merger plan for Interlock and Happy Diet.   His subsequent action in abusing the information to deal in their stocks for personal gain has not only violated the

*Codes of Conduct but also the insider dealing provisions of the Securities and Futures Ordinance.

*Remarks: Codes of Conduct refer to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, the Code of Conduct for Corporate Finance Adviser and the Fund Manager Code of Conduct.

Donald might breach Section 83 of the Banking Ordinance for approving loan to his wife. He might also violate the Code of Conduct[1] of his bank for granting credits or loans to himself or to members of his immediate family including spouse or to companies in which he or his immediate family is interested. Before processing the loan application submitted by his wife, Donald should observe the specific guidelines which his bank adopts in relation to transactions with connected parties and declare his relationship with the applicant to his bank.

[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 grant credit to himself, his relatives or companies in which he or his relatives have a personal interest.”