FSA warns brokers over corruption risk

The FSA has warned commercial brokers to tighten up their procedures to guard against the risk of bribery and corruption, following a wide-ranging review of the issue.

The review, the result of an investigation into 17 firms over the course of last year, finds that:

• broker firms are not approaching higher risk business which involves third parties with sufficient care and need to do more to cut the risk of becoming involved in bribery or corruption;
• broker firms' due diligence on, and monitoring of, third party relationships and payments is weak, leading to a significant risk of illicit payments or inducements being made to, or on behalf of, third parties to win business
• many broker firms cannot currently demonstrate that they have adequate procedures in place to prevent bribery.

The FSA has already taken measures against two of the firms that it visited and is considering whether enforcement action is needed in other cases.

The regulator has issued a formal private warning to one firm following evidence that payments were made to a third party without an adequate business case being established and documented.

In addition it has commissioned a report to assess past payments to third parties made by another firm.

Bob Ferguson, head of financial crime at the FSA, said: “Commercial insurance broker firms should recognise that, due to the nature of their core business, they are at risk of becoming involved in corrupt practices such as bribery.

"The involvement of UK financial institutions in corrupt or potentially corrupt practices overseas undermines the integrity of the UK financial services sector. Firms should take an appropriate, risk-based approach to anti-bribery and corruption and failure to do so will result in us taking action against them.”