Under Section 9 of the Prevention of Bribery Ordinance (POBO), it is an offence for any agent, without the approval of his principal, to solicit or accept an advantage as a reward for or an inducement to perform an act in relation to his principal’s affairs or business. The offeror will also be guilty of the offence. Even if the acceptance of bribes takes place outside Hong Kong, if any part of the bribery act (including offering, soliciting or accepting a bribe) takes place in Hong Kong, the case can be pursued under the POBO. Furthermore, according to Section 11 of the POBO, as long as the offeror of bribes intends to induce the acceptor to extend his/her favour(s), both parties would have committed bribery offence even if the acceptor claims that he/she 'did not actually have the power to do so', 'did not intend to do so' or 'did not, in fact, do so'. Hence, Mr Lee might have committed the offence of offering bribes and could not claim in his defence that the purpose of the bribes had not been carried out. Similarly, if Mr Cheung had accepted the red packet without declaring it to the bank, he might also have committed an offence even if he had not ultimately helped Mr Lee.

Entertainment means the provision of food and drink for immediate consumption, whereas dried seafood, spirits or red packets are advantages. The offeror cannot offer bribes in excuse of 'an established custom in the trade or 'trade practice'. According to Section 19 of the POBO, the court will not accept such defence on the part of either the offeror or the acceptor, but will only consider whether or not the acceptor has the permission of the principal.

According to the guidelines laid down in the Supervisory Policy Manual — Code of Conduct (the Code) issued by the Hong Kong Monetary Authority, a bank employee must declare any advantage received in the course of business.  While the acceptance of mere entertainment does not constitute an offence, entertainment that is in any way luxurious is very likely a prelude to corruption or bribery. Hence, the Code further stipulates that a bank employee can only accept normal business entertainment such as an ordinary meal.

When facing corruption temptation, Mr Cheung should make a declaration in compliance with the Code and report the offering of gifts and red packets offered by Mr Lee to the bank in order to protect himself from being implicated in a bribery case.

Things can go wrong when technology is left in the wrong hands and management does not keep a watchful eye on its use.  Blindly trusting the system without regulating and controlling it is a recipe for disaster.  Good judgement plus positive interaction with technical staff is the key to addressing the risk factors created by adoption of new technologies.   Managers have to instill a high level of ethical standards among staff to ensure that all procedures are followed and that all regulations are complied with.  This is especially important in vulnerable areas such as the handling of valuable information and the procurement of supplies and services.

Under Section 9 of the Prevention of Bribery Ordinance (POBO), it is an offence for any agent, without the approval of his principal, to solicit or accept an advantage as a reward for or an inducement to perform an act in relation to his principal’s affairs or business. The offeror will also be guilty of the offence. 

In this case, the manager, an employee (agent) of the finance company (the principal), accepted commission (advantage) from the property developer as a reward for favourably recommending the loan proposal (an act in relation to the finance company’s business). Under the POBO, the manager was considered to have accepted the advantage even his wife received the advantage on his behalf.  Hence, the manager might have contravened Section 9(1) of the POBO for accepting bribes. The property developer might have contravened Section 9(2) of the POBO for offering bribes.

On the other hand, the manager might have breached Section 9(2) of the POBO for bribing the property valuer (agent of the property valuation agency) to inflate the value of the collateral, while the latter might have contravened Section 9(1) of the POBO for accepting bribes from the manager. They also might have contravened Section 9(3) by each submitting false, misleading valuation reports to their employers.

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

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.

The relationship manager (agent) might have contravened Section 9(3) of the Prevention of Bribery Ordinance (POBO) by using a false document (forged customer instruction) to deceive the bank (the principal).  He might also be liable of a series of other crimes including theft, fraud and forgery.

Some elderly customers may be vulnerable to exploitation as they may trust bank staff members (e.g. the relationship manager) to execute transactions on their behalves (e.g. signing blank instruction forms or giving their e-banking passwords) so as to save physical visits to the bank.

The practice of keeping account advices for customers to collect later on is vulnerable to falsification or concealing irregularities.

Furthermore, inactive, dormant accounts with a large balance or credit line are subject to the risk of exploitation, as the account owners may not monitor their accounts properly or may have changed addresses without informing the bank.

Banks should devise control measures to protect dormant accounts from possible abuse and to avoid fraud. These control measures may include alerts on unusual fund movements, verification and confirmation with the customers, requirements for supervisors’ review/ override for transactions on inactive accounts, and requirements for identification of account holder when making withdrawals in person.  Moreover, implementing requirements for staff members to take annual vacation leave, arranging and introducing a backup/ second officer to vulnerable customers, and practising staff rotation (say, on a three-year basis) may also help detect irregularities and misconduct at an early stage.

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.

Jack was facing an ethical dilemma that might put his personal values such as honesty, responsibility and compassion to challenge. In handling situation like this, Jack 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 responsibility, honesty, compassion, etc.?
4. Can he disclose his decision to others openly and honestly without misgivings?

The ETHICS PLUS ethical decision making model might be helpful for him in solving his ethical dilemma.