By Neil McInnes, Senior Associate, Pinsent Masons London

We reported the recent FSA decision in the Willis case here.

The decision is pre- Bribery Act Era but what light does it shed on future enforcement?

The FSA’s Final Notice is a window on how the FSA judge the adequacy of a firm’s anti-corruption procedures.

First, it is worth remembering Willis did have in place anti-bribery policies and guidance. But it was still fined.

Why?

In part first, because of a failure to implement these policies across its business. Cross reference to the 6 principles in the Government Guidance under the Act and the lineage is clear: proportionate procedures must be “clear, practical, accessible, effectively implemented and enforced”.

Second, Willis was not a wilful blindness case. Amongst other things, the firm had commenced a review of a sample of its Overseas Third Party Relationships, but the FSA judged this was not sufficient and the review should have been expanded sooner.

In other words, this is a case of a firm taking some steps and those not being adequate in themselves in the eyes of the regulator. It is a far cry from an enforcement action against a firm that had done nothing whatsoever to enquire about its higher risk relationships.

Will the Courts be this strict?

Third, the heart of the problem found with the due diligence in Willis was the failure to establish and, importantly, record whether there was an “adequate commercial rationale” for the engagement and commission levels paid to the overseas third parties. Fast forward to the Government Guidance and Case Study 6, which includes the critical commercial questions to be alert to:

“Is the agent really required?

Does the agent have the required expertise?

Are they interacting with or closely connected to public officials?

Is what you are proposing to pay reasonable and commercial?”

So the Willis decision is another warning to the those who may have wrongly concluded that paper compliance will suffice or that policies alone could ward off a regulatory investigation. This case may be a precedent for regulators to take a far more critical approach and scrutinise the pace and depth of a company’s compliance programme.

Finally, for companies in the Financial Services sector, the case is another example of the FSA’s expanding horizon in the field of financial crime. Its remit in relation to corruption is neatly summed up in its statement in the Willis decision as follows:

“The involvement of UK financial institutions in corrupt or potentially corrupt practices overseas undermines the integrity of the UK financial services sector.  Unless they have in place robust systems and controls which govern the circumstances in which payments may be made to third parties and then ensure those systems and controls are followed, UK financial services firms risk contravening UK and/or overseas anti-bribery laws. The FSA’s financial crime and market confidence statutory objectives are both endangered by UK firms’ failures in this regard.”