The FSA is to set to embark on a thematic review focusing on bribery and corruption in the asset management industry, according to law firm Dechert LLP.
The law firm says twenty two asset managers have already been identified for review with the regulator set to publish its report in the third quarter of 2013.
Dechert LLP has called on all asset managers to review their compliance in these area, regardless of whether they are visited by the regulator or not. It also says any failing in the bribery and corruption, sanctions and money laundering functions at firm’s could result in “significant adverse consequences”.
The new Bribery Act has put pressure on commercial organistaion to put in place new measures to counteract any concerns with the UK’s Serious Fraud Office believed to be looking at a number of new investigations under the act.
The FSA’s thematic review of bribery and corruption compliance in investment banks, published in March of this year, identified significant weaknesses, including failure to undertake adequate anti-bribery and corruption risk assessments, poor management information, failure to carry out specific anti-bribery and corruption audit and significant issues in firms’ dealings with third parties used to win or retain business.
In addition, the FSA identified that firms in the investment banking sector had been too slow and too reactive in managing bribery and corruption risks. In particular, the FSA criticised the limited understanding of the relevant issues and failure to monitor the effective implementation of policy and procedures.
Dechert says that in relation to asset managers, the FSA could focus on compliance with money laundering regulations and, if recording errors or breaches are found, choose to look more deeply into the affairs of the manager and its attitude to compliance. Compliance with the money laundering regulations, which are unlikely to change in substance for several years, will be seen as a necessary part of business and although evidence of money laundering is almost certain to be absent, failure to document relationships properly could lead to a deeper review.
Dechert says all of these issues should be of concern to the asset management sector, particularly as a result of the FSA’s recent enforcement track record against the banks.
Dechert says: “If the findings of the FSA’s thematic review into asset managers identify as many weaknesses into anti bribery and corruption compliance as the thematic review into investment banks earlier this year, asset managers should be very cautious of any future enforcement action. In particular, asset managers should be wary of the risk of enforcement action by the FSA as a result of a firm’s systems and controls failings in addition to, and independently from, the firm’s risk of being prosecuted by the SFO under the Bribery Act itself.”