Cross-Boundary Business Operations

Self Photos / Files - 3-3-1Cross-boundary business operations may encounter corruption risks due to the differences in law, social environment, staff culture as well as problems relating to "remote management" of the business.

 


A  case in point

Self Photos / Files - 3-3-2-en

 

  • A senior merchandiser of a Hong Kong-based herbal tea manufacturing company is responsible for purchasing herbal materials from various Mainland suppliers.
  • On several occasions, the senior merchandiser solicits loans from a Mainland herbal supplier in return for placing purchase orders with the latter.
  • He also inflates the expenses incurred in his business trips and furnishes false receipts to deceive the company.
QHas the senior merchandiser committed any corruption offence in Hong Kong?

Yes. The senior merchandiser has committed offences under Section 9 of the POBO which deals with corruption crimes in private sector.

 

He has violated Section 9(1) of the POBO because he is an agent (i.e. an employee), who without the approval from his principal (i.e. the herbal tea manufacturing company), solicits an advantage (i.e. loans) from a supplier as an inducement for his doing an act in relation to his principal’s business (i.e. placing purchase orders with the supplier).

 

He has also violated Section 9(3) of the POBO for using false documents (i.e. furnishing false receipts with inflated expenses) to deceive his principal.

8 Life Hacks for Cross-boundary Business Management:

1Observe the laws in Hong Kong. It shall be an offence under POBO if any act of bribery takes place in Hong Kong.
  • Any act includes promising, agreeing, soliciting or accepting advantages without permission.
  • Accepting bribes, whether directly or indirectly (e.g. through a third party), is against the POBO.
2Comply with laws and regulations in other jurisdictions when conducting business overseas.
  • If the corrupt transaction takes place in the Mainland China, it may violate the anti-bribery provisions in the Criminal Law and the Anti-Unfair Competition Law  of the People’s Republic of China
  • Don’t deal with any property if knowing or having reasonable grounds to believe that the property is involved in any criminal or money laundering activities.
3Don’t offer bribes to state or public officials. Some countries’ anti-bribery laws have provisions with extraterritorial effect.

A Hong Kong listed company and a US-listed company with regional headquarters in the UK had a joint venture in the Mainland.  The Chief Finance Officer noticed some red flags in the accounts and asked the assistant manager for explanation. The assistant manager said that he was instructed to send representatives of potential Mainland clients luxury goods in order to facilitate the procurement of contracts.

 

Download feature article on Integrity and Compliance with Local Laws in Cross Boundary Operations

Transcript
4Should not blindly follow so-called ‘customary practices’ when conducting company’s business.
  • Customs are no defence. According to POBO the offeror cannot offer bribes in excuse of 'an established custom in the trade' or 'trade practice'.
5Set clear company’s guidelines on offering and acceptance of advantages and entertainment during business trips.
  • Employees accepting frequent or lavish entertainment from suppliers/business partners may affect their objectivity in dealing with suppliers/business partners.
6Formulate a corporate ethical code and proactively encourage the whistle-blowing about corruption and malpractice.
  • Company should follow the legal requirements of the jurisdiction where the business operates and the company’s own business practices when drawing up a code of conduct.
  • Hong Kong Business Ethics Development Centre assists business organisations in formulating or reviewing codes of conduct.
7Arrange staff training programmes to raise their alertness to ethical issues and corruption prevention.
8Cultivate an ethical culture across the board regardless of the location of the company’s operations.
  • The Hong Kong Business Ethics Development Centre publishes a variety of business ethics resources (for use by the companies to remind staff of the importance of upholding integrity.
  • Download anti-corruption posters here.
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