By Peter Yuen
In China, it is the responsibility of each individual business organization to determine the ethical standards of behaviour for its management and employees. Management of a responsible company should ensure that the anti-corruption and anti-bribery policy adopted by the company is enforceable, practical, up-to-date and set in accordance with fair competition principles. A well-established anti-corruption and anti-bribery policy can help prevent corruption and fraud, control and minimise damages should these activities occur, and build a company's reputation.
What Should be Included
Promotion of Honesty
Responsible management should aim to build a culture where employees are expected to carry out their duties to the best of their abilities for the benefit of the company, and not to take advantage of any situation for personal gain.
Encouraging Raising Concerns
The management should encourage individuals to raise concerns regarding the integrity of anyone acting on behalf of, or in business with, the company.
Prevention Over Cure
The best deterrent against fraud and corruption is a clear framework of procedures and responsibilities, which will help to disclose fraud and corruption at their earliest stages. This framework will include clear guidance on the investigation of all allegations and ensure that sufficient professional resources are available for detection. The existence of such a framework should give a strong warning to any person contemplating dishonest actions against the best interests of the company.
When hiring new management level employees, written references should be sought regarding each candidate's honesty and integrity.
New employees should receive induction training regarding relevant company fraud and corruption policies.
Taking appropriate action
The senior management should ensure that all identified irregularities are reported to a designated senior officer and are promptly and properly investigated. Appropriate disciplinary action should be taken when necessary. Procedures should also be stipulated to ensure that losses are recovered wherever appropriate.
It is often difficult to assess the seriousness of problems related to corruption and bribery, and what action the management must take. Almost invariably, the management will want to carry out some form of investigation.
In the financial sector, if it becomes necessary to contact regulators, the management should demonstrate an understanding of the problem and show regulators that the matter is under control.
Experience also shows that seemingly minor issues may end up having major consequences, and action may be required, not only in relation to the regulators but also potentially involving customers, staff, system, market counterparts, insurers, and even the press.
Therefore, it is important to get to the root of the problem as soon as possible, and to make a thorough assessment of its implications.
Before conducting staff interviews, the investigation team should identify all relevant people and relevant documentation those people are likely to have.
It is good practice to tell an employee in advance why he is being interviewed so that the employee has a chance to prepare.
In appropriate circumstances, it would also be necessary to explain to the employee that (i) information obtained in the interview may be used for the purposes of disciplinary action, and (ii) the employee is not permitted to disclose any information obtained during the interview, which may be deemed sensitive to the company.
If there is a real risk of the employee facing criminal prosecution, or a risk that the employee's interests and those of the firm will conflict, it should be made clear to the employee that he may seek independent legal counsel.
During an investigation, the company may consider it necessary to review the personal and work-related documents and communications of their employees.
The company's right to take such action is dependent upon the extent of the employee's right to privacy as against his employer. This is, as yet, untested in China.
Responsible management should be transparent with employees about the degree of office monitoring, and arrangements should be made to:
¡P inform employees that their emails and telephone calls may be monitored, stored and reviewed for various purposes, including to ascertain regulatory compliance, and preferably to obtain employees' consent to this;
¡P create a policy on the use of emails, the telephone and computers for private purposes; and
¡P ensure employees that if emails and telephone calls are monitored and recorded, it is done purely for the purpose of:
o establishing the existence of facts; and/or
o ascertaining compliance with applicable regulatory practices or procedures; and/or
o preventing or detecting a criminal offence.