Joe Lee, Head of Advisory Services Joe Lee, Head of Advisory Services Corruption Prevention Department Corruption Prevention Department
Corruption in the Corruption in the Private Sector Private Sector
Corruption Prevention Corruption Reports Corruption Reports Hong Kong ICAC Prevention Corruption
Corruption Prevention Natures (Private Sector) Natures (Private Sector) Hong Kong ICAC Prevention � Procurement & contract management Corruption 4
Corruption Prevention Corruption in Purchasing Corruption in Purchasing Hong Kong ICAC Prevention Company Supplier Company Supplier Company Supplier Order/Contract Order/Contract Corruption Staff / Senior Executive Staff / Senior Executive Staff / Senior Executive Bribe Bribe 5
Corruption Prevention Corruption in Purchasing Corruption in Purchasing Hong Kong ICAC Prevention Company Supplier Company Supplier Company Supplier Order/Contract Order/Contract Corruption Staff / Senior Executive Staff / Senior Executive Staff / Senior Executive Relative/ Self-owned 6
Corruption Prevention Corruption in Purchasing Corruption in Purchasing Hong Kong ICAC Prevention Company Supplier Company Supplier Company Supplier Order/Contract Order/Contract Corruption Information on others’ bids Information on others’ bids Staff / Senior Executive Staff / Senior Executive Staff / Senior Executive 7
Corruption Prevention Corruption in Purchasing Corruption in Purchasing Hong Kong ICAC Prevention Company Supplier Company Supplier Company Supplier Order/Contract Order/Contract 1 Genuine Quotation 1 Genuine Quotation Corruption 2 Fake Quotations 2 Fake Quotations Staff / Senior Executive Staff / Senior Executive Staff / Senior Executive 8
Corruption Prevention Corruption in Purchasing Corruption in Purchasing Hong Kong ICAC Prevention Company Supplier Company Supplier Company Supplier <$0.5M order <$0.5M order <$0.5M order Order/Contract Order/Contract <$0.5M order <$0.5M order <$0.5M order <$0.5M order <$0.5M order <$0.5M order $XXm XXm <$0.5M order $ <$0.5M order $XXm <$0.5M order Corruption <$0.5M order <$0.5M order <$0.5M order Orders Orders Orders <$0.5M order <$0.5M order <$0.5M order <$0.5M order <$0.5M order <$0.5M order <$0.5M order <$0.5M order <$0.5M order <$0.5M order <$0.5M order <$0.5M order Staff / Senior Executive Staff / Senior Executive Staff / Senior Executive • Inadequate segregation / checks & balances • Inadequate controls: companies often think requiring quotations = adequate control 9
Corruption Prevention Natures (Private Sector) Natures (Private Sector) Hong Kong ICAC Prevention � Procurement & contract management � Favour to others Corruption 10
Corruption Prevention Bank Loan Bank Loan Hong Kong ICAC Prevention Bank Bank Loan, Increase Credit, Lower Rate Recommendation Company Company Loan Application Corruption Bribe Banker / Customer Banker / Customer Service Manager Service Manager • Pressure for sales � relaxation of controls • Inadequate checks & balances & segregation 11
Corruption Prevention Natures (Private Sector) Natures (Private Sector) Hong Kong ICAC Prevention � Sales, business referrals � Staff Management � Misappropriation of funds/assets, misuse of Corruption company resources (e.g. customer data) 12
Corruption Prevention Hong Kong ICAC Prevention “Bribery Bribery” ” “ Corruption 13
Corruption “Corrupt Transactions with Agent” Prevention Hong Kong ICAC Section 9(1) Section 9(2) Prevention Agent (e.g. Employee) Any person without lawful authority / reasonable excuse solicits/accepts offers Corruption Advantage, as reward/inducement Do / not do any act, favour or disfavour, in relation to Principal's (e.g. Employer’s) business Offence: Max. 7 years & $500,000 EXCEPT with principal’s permission 14 (before or asap after)
Corruption Prevention Principal’ ’s Permission s Permission Principal Hong Kong ICAC Prevention May I? OK! OK! Corruption Policy on Policy on Advantages… Advantages…
Corruption Prevention Principal & Agent Relationship Principal & Agent Relationship Hong Kong ICAC Prevention In a Company: � Principal = The Company � A Director is an agent of the Company Corruption Outside the Company: � The Company (or its director/employee) could be agent of another (e.g. a client) � The Company’s business partner could be agent of another (e.g. a client) 16
Strategy & Measures Strategy & Measures to Fight Corruption to Fight Corruption
Corruption Prevention ICAC Anti- -Corruption Strategy Corruption Strategy ICAC Anti Hong Kong ICAC Prevention Enforcement Enforcement Corruption The Three- The Three- Pronged Attack Pronged Attack Education Education Prevention Prevention Since 1974 18
Corruption Prevention ICAC Anti- -Corruption Strategy Corruption Strategy ICAC Anti Hong Kong ICAC Prevention Enforcement Enforcement Operations Operations Corruption The Three- The Three- Pronged Attack Pronged Attack Community Corruption Education Education Community Corruption Prevention Prevention Relations Prevention Relations Prevention Since 1974 19
Corruption Prevention Fraud Theory: The Fraud- - Fraud Theory: The Fraud Hong Kong ICAC Prevention Opportunity Opportunity Corruption Fraud Fraud Rationalization Rationalization Intent/Pressure Intent/Pressure 20
Corruption Prevention 3- -Pronged Attack on the Fraud Pronged Attack on the Fraud- - 3 Hong Kong ICAC Prevention Corruption 21
Corruption Prevention Framework for a Corporation Framework for a Corporation Hong Kong ICAC Prevention Human Approach Enforcement System Approach Law Enforcement Post-mortem Agency Whistle-blowing Detection & Action Risk Corruption Assessment, Audit & Review Integrity Management Programme Transparency Corruption Company Intent/Pressure, V Opportunity Policies & Rationalisation Procedures Preventive & Detective Controls 22
Corruption Prevention Ethical & Compliant Culture Ethical & Compliant Culture Hong Kong ICAC Prevention � Laid � Laid- -down Standard/Guidelines down Standard/Guidelines � Corporate Core Values � Code of Conduct � Education � Education Corruption � Laws & regulations, ethics � Company policies, rules, procedures � Action � Action � Comply with laws & regulations (spirit too) � Adopt ethical/compliant business practices � Provide support, e.g. enquiry/reporting channel � Enforcement 23
Corruption Prevention Code of Conduct Code of Conduct Hong Kong ICAC Prevention Common Inadequacies: Common Inadequacies: � � Code applying to staff, but not Directors but not Directors Code applying to staff, � � No reminder not to offer not to offer corrupt gifts corrupt gifts No reminder � � Corruption Offer of business gifts/commissions should not exceed of business gifts/commissions should not exceed Offer $XXXX or requires approval $XXXX or requires approval � � Need to seek permission/declare, but from/to whom Need to seek permission/declare, but from/to whom? ? � � No guideline on acceptance of entertainment No guideline on acceptance of entertainment � � There’ There ’s a code somewhere but s a code somewhere but nobody nobody has read it has read it 24
Corruption Prevention Code of Conduct Code of Conduct Hong Kong ICAC Prevention � Apply to or separate Code for � Apply to or separate Code for Directors Directors � Acceptance of advantages � Acceptance of advantages (from persons having (from persons having business dealings with the company) business dealings with the company) � prohibit acceptance of advantages for showing favour / Corruption where impartiality is influenced � allowable circumstances & value & procedures Address Address Address � approving authority, reporting channel POBO POBO POBO concerns concerns concerns � client’s permission (if applicable) � Avoidance/declaration of � Avoidance/declaration of conflict of interest conflict of interest � declare to whom, declaration form � give practical examples 25
Corruption Prevention Code of Conduct Code of Conduct Hong Kong ICAC Prevention � Prohibit � Prohibit offer offer of illegal advantages (bribery) of illegal advantages (bribery) � Relationship � Relationship with clients, suppliers, etc. with clients, suppliers, etc. � e.g. not to accept lavish & frequent entertainment Corruption � No misuse � No misuse of of official position, company official position, company property or information property or information � Consequences � Consequences of breaches of breaches � Enquiry / reporting � Enquiry / reporting channel channel � Endorsed by Board / GM � Endorsed by Board / GM 26
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