A recent SEC (US Securities and Exchange Commission) press release declared that "The Securities and Exchange Commission today announced that BNY Mellon has agreed to pay $14.8 million to settle charges that it violated the Foreign Corrupt Practices Act (FCPA) by providing valuable student internships to family members of foreign government officials affiliated with a Middle Eastern sovereign wealth fund."
The penalty issued by the SEC is the first for a violation of this kind and marks the beginning of a regulatory trend to investigate the hiring practices of financial institutions. US banks have responded angrily to the U.S. government over whether they have violated U.S. anti-bribery laws by giving jobs to 'Princelings', defending their actions as standard business practices in some countries.
The investigation followed a 2011 whistleblowing report from a bank official in Asia who alerted internal legal and compliance executives that the bank's recruitment of a senior Chinese official helped to win an investment-banking assignment. The report stated that J.P. Morgan had paid $1.8 million to a consulting firm run by the daughter of a former Chinese premier while the premier was overseeing financial regulations in the country. The unlawful "Sons and Daughters" scheme created ensured they hired qualified children of Chinese officials which, in turn, allegedly led to winning multiples assignments from the Everbright Group (of which J.P. Morgan had hired the son of the chairman) and helped China Railways (who they had hired the daughter of an official) raise more than $5 billion when it went public in 2007. In the past year, J.P. Morgan has fired at least four executives related to its sons and daughters program.
Media reports have stated the SEC has made enforcing anti-bribery laws a priority with the agency pursuing high-profile cases across several leading financial institutions including Credit Suisse, Citigroup, Deutsche Bank, Goldman Sachs, and Morgan Stanley. The banks have all been asked to voluntarily disclose whether they have a referral hiring program for relatives of government officials.
Although banks are contesting the government's view of their hiring decisions, some observers are noting that they are almost certain to agree to settle any enforcement action as the reputational and financial risks of a courtroom battle are so high. With the increase in regulatory focus, due diligence is becoming an important part of a joined up recruitment process with a significant number of organisations carrying out due diligence checks not only on candidates, but on all applicants.
ps 3 ways you can apply this information right now to…