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Common trade practice is not a defence

Trades / Industries:

Andrew was the chief accountant of a large trading company.  Due to keen competition, the business of the company deteriorated substantially.  To improve the situation, the company attempted to invest in the Mainland.


When reviewing the books and bank statements, Andrew found that there was evidence of fraudulent activities involving some sales representatives. Andrew discovered that there were no supporting documents for some cash payments claimed by the sales representatives.  When asked for explanations, the sales representatives replied that those expenses had been incurred for the purpose of building up new businesses in the Mainland.  They further explained that the offering of commission to agents of business clients was a common practice.  When consulting the Marketing Director who was a long serving staff of the company, Andrew was told that the expenses were approved by  the Marketing Director personally. 


With no choice, Andrew went to see the Vice-president.  The Vice-president pacified Andrew and told him that in real business life, the company had to tolerate some minor variations in order to get the job done.


Next day, a cheque was placed on Andrew’s desk and the phone rang.  It was the Marketing Director.  Andrew was asked to sign the cheque and was told that it would be deposited in a designated Hong Kong bank account belonging to a buyer of a firm in the Mainland.  The arrangement enabled the buyer to pay for his various expenses while on business in Hong Kong.  He further suggested that the sum could be paid by an overseas subsidiary of the company.


Although Andrew knew that the client was very important to the company, he suspected that the payment might be unlawful.


What should Andrew do?


Case Analysis

The sales representatives committed an offence under Section 9(3) of the Prevention of Bribery Ordinance (POBO) offence if they had submitted false documents i.e. claims of commissions or entertainment expenses to deceive their principal i.e. the company.   


Furthermore, the offering of illegal commissions to agents of business clients with a view to obtaining or securing business might constitute a bribery offence under the POBO.   Agents of clients should obtain permission from their principals, i.e. their employers, for accepting advantages or commissions in relation to their work.  As approval should be given by the principal of the acceptor not the offeror, the Managing Director’s approval on the expense payments would not be considered the principal’s approval in this case.  


Although the clients were located in the Mainland, if any part of the act of bribery (including offering, soliciting or accepting a bribe) takes place in Hong Kong, the case may still be pursued by the ICAC under the POBO.  In any case, customary trade practice could not be a defence in any proceeding for a bribery offence under the POBO.  


Andrew should bring the issues to the attention of the company management and avoid involve in any acts that might call his integrity and professionalism into question. He should take into account his own views on ethics and legality and offer advice to the management if there were better alternatives.  


If corruption involving senior management was suspected, and all his attempts to find legal and ethical alternatives were rejected, then Andrew should consider resigning from the company and refuse to carry out any illegal transactions. He should consider reporting corruption to the ICAC and other crimes to the police.

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