Resources
Case Studies
Bribery during site inspection
A factory owner applied for credit facilities secured by new production equipment. The bank instructed a senior credit manager and a credit manager to visit the applicant’s factory at Guangdong. The senior credit manager and the credit manager noticed that the equipment of the factory was very out-dated when conducting the inspection. The factory owner then requested for a favour and offered expensive watches to both managers. The senior credit manager signalled his subordinate to accept the gift. The senior credit manager also accepted the gift himself and later submitted a favourable report to the bank. The credit manager, however, took the gift but reported the incident to the bank on the following day.
Case Analysis
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.