Experts say organisations can expect to see significantly more action from the FSA on financial crime, anti-money laundering, sanctions breaches and bribery

On Thursday (21 July) Willis was slapped with the highest fine yet by the Financial Services Authority (FSA) for failing to prevent bribery overseas.

The FSA handed Willis a £6.9m (€7.87m) fine following an investigation that unearthed “suspicious payments to counterparties in Egypt and Russia”.

It’s a bigger fine even than the £5.25m penalty that Aon received following similar offences, which caused such a stir in January 2009.

Willis was found to be making payments to oversees third parties which helped them to win business without adequate anti-bribery and corruption controls in place.

“Willis Limited failed to take the appropriate steps to ensure that payments it was making to overseas third parties were not being used for corrupt purposes,” said Tracey McDermott, acting director of enforcement and financial crime at the FSA.

The scolding is particularly embarrassing for Willis considering its chairman and CEO, Joe Plumeri, has been so vocal about his principled stand and moral commitment to reject contingent commissions, which are seen by many as a type of kickback.

The fact that two of the world’s biggest insurance brokers have been penalised over bribery is very disappointing. The big brokers should be setting an example in this area.

The FSA was clearly miffed with Willis and said as much in its statement. “This is particularly disappointing as we have repeatedly communicated with the industry on this issue and have previously taken enforcement action for failings in this area.”

For its part Willis said it has taken "comprehensive and effective action" to remedy the shortfalls in its overseas payment controls discovered by the FSA.

"We recognise the importance of such measures in assuring ourselves and stakeholders that the risk of wrong-doing is designed out of the way we do business,” said Willis Limited chief executive Brendan McManus in a statement.

The latest fine follows a sector wide regulatory investigation in 2009 that found “significant weaknesses” in brokers’ business practices and their anti-corruption measures. It was a clear early warning sign that the FSA was serious about cracking down on brokers and how they prevent bribery.

Unfortunately the signal seems to have been missed, or ignored. The FSA hopes that big fines, such as this one, will serve as a better deterrent.

This is just the latest action by the FSA, organisations can expect to see significantly more emphasis from the watchdog on financial crime, anti-money laundering, sanctions breaches and bribery, according to compliance experts.

Reacting to the news of the Willis fine, Howard Sklar, senior corporate counsel at Recommind, said that had these events occurred more recently (the fine relates to actions between January 2005 and December 2009) they might have posed as a good candidate for a UK Bribery Act test case.

But Sklar also defended Willis by saying that long before the UK Bribery Act was passed in 2005 “no one was paying attention” to anti-bribery measures and “adequate procedures to prevent this kind of scheme were virtually non-existent”.

“Even today, implementing controls for these kinds of payments is extremely difficult,” he said. “Plus, the jurisdictions here, Egypt and Russia, are considerably risky places to do business.”

“One of the greatest compliance challenges companies face is gaining a full understanding of the activities and methods of intermediaries acting on their behalf," added Matteo Bigazzi, managing director of K2 Global Consulting.

Neill Blundell, a partner at law firm Eversheds, added: “The new Bribery Act is clearly not going to be the first port of call when dealing with regulated businesses falling short, partly because the FSA lacks the power to criminally prosecute under it. Instead the FSA will use its regulatory powers to good effect, going after the failings in systems to prevent bribery and corruption."

It is easier for the FSA to get results this way because there is no need for it to prove an actual offence, he said.

The FSA has published a financial crime guide that aims to improve firms' understanding of their requirements on anti-money laundering, terrorist financing, fraud, data security, bribery and corruption, sanctions, and weapons proliferation financing.

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