The UK’s anti-bribery efforts gather pace, with what amounts the third successful prosecution/settlement. This time, the FSA has levied its largest ever fine for financial crimes, of £5.25 million against insurer Aon Limited,Aon Corporation’s principal UK subsidiary.
This penalty is in respect of Aon Ltd’s breach of Principle 3 of the FSA’s Principles for Businesses. This provision requires all regulated firms to take reasonable care to organise and control their affairs responsibly and effectively, with adequate risk management systems. (There are only 12 short principles. They can be found here. Principle 3 states that:
“A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.”
AON made at least 66 suspicious payments, amounting to approximately $2.5m plus €3.4m, to a number of overseas firms and individuals. The regions involved included Bahrain, Bangladesh, Bulgaria, Burma, Indonesia and Vietnam. As a result of the alleged bribes, AON received commission or brokerage of approximately $7.2m and €1m.
The conduct was apparently discovered following the departure of a former broker, when inappropriate payments to secure energy reinsurance contracts in Indonesia came to light. An internal review followed, at which time further problem payments in more jurisdictions were found. Disclosures to the Serious Organised Crime Agency under the money laundering regulations and to the FSA were apparently made at the same time.
In January 2009, the FSA imposed a penalty of £5.25m. The matter was settled at an early stage, and in the light of Aon’s co-operation and extensive investigation and remediation efforts, this represented a 30% discount on what would ordinarily have been the case.
In its Final Notice to Aon the FSA highlighted deficiencies in Aon’s systems and controls which it thought created an inadequate environment for controlling payments to overseas third parties. They include:
- failure properly to assess, review and change systems and controls relating to payments to overseas third parties;
- inadequate due diligence, authorisation and payment procedures;
- no ongoing monitoring of relationships with overseas third parties. In particular, there was no internal requirement to carry out ongoing checks or periodic reviews of overseas individuals, companies or payments and limited monitoring by Aon’s compliance function or under their internal audit procedures;
- inadequate training and guidance, particularly of lower level staff;
- lack of oversight by management. The FSA found that Aon’s board and risk management committees failed to exercise sufficient oversight in respect of the transacting of business with overseas third parties.
Following the case, Aon put in place a comprehensive anti-bribery compliance program, and outlawed the use of intermediaries whose sole function was to get business in high bribery-risk jurisdictions.
This settlement gives an indication of the advantage to be gained from co-operation when problems come to light.
The FSA press release can be found here. The FSA final notice, containing full details of the case can be found here.
The true cost of the Siemens fine
It is clear that the cost to Siemens is far higher than even the record breaking $1.6billion would suggest. Although 4,000 payments worth at least $1.4 billion to foreign officials to obtain or retain business was always going to attract a large penalty, people in the know that we have spoken to have estimated that when costs and interest are taken into account, it is likely that the true will be nearer to a staggering $2.9billion.
It was the vast remediation efforts that stopped the fine being even larger. The remediation costs alone are huge:
Thanks to our friends at Gibson Dunn for their 2008 FCPA update, which can be found here, for highlighting this.
But the DOJ and SEC seem to have loved it all – and such extensive remediation manpower is destined to a be a feature of the spate of forthcoming cases.