Bryan might breach the Code of Conduct[1] of the bank by accepting an advantage from Alan, i.e. the abnormally low price and the favourable repayment terms. Bryan should decline such an offer or seek approval from the bank's management.

Although the advantage did not seem connected to Bryan's official duties at the time of the offer, it might put him in a position of obligation to reciprocate in future and place him in a compromising situation when he was asked to return a favour.

[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 bank or any individual organisation doing or seeking to do business with it.”

Kim and Angela might have breached the Securities and Futures Ordinance for disclosing and acting on unpublished price sensitive information. They might have also exposed the bank to legal liability since the bank had bought the shares as a result of inside information.

Kim might have further violated the internal code of conduct^[1] of her bank as she leaked customer's information to a third party, even though in this case the third party was also a member of her 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 release customer information to a third party without written consent from the relevant customer, unless the release complies with the Personal Data (Privacy) Ordinance or he is required or permitted to do so by law.”

In the above case, the bank manager was an employee of the bank, i.e. an agent under Section 9 of the Prevention of Bribery Ordinance (POBO) while the bank was the principal.

The bank certainly would not allow the manager to accept advantages related to  his  official  position,  thus  the  rebate  was  an  illegal  advantage  and the acceptance of which constituted an offence of accepting a bribe. The finance company director also committed bribery for offering illegal advantages.  

Under the POBO, food or drink for consumption on the occasion when it is provided is considered as "entertainment", which is not defined as an advantage. Even though it is not against the law to accept entertainment, accepting excessive level of entertainment by a bank staff may breach the Code of Conduct of the bank. The bank manager compromised his impartiality when he dined frequently with the finance company director.

Although entertainment is common in business practice, a bank staff should avoid meals or entertainment that are excessive in nature or frequency, so as not to cause embarrassment or loss of objectivity when conducting business with clients. In case of doubt, it would be prudent to consult the bank’s management prior to acceptance.

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.