Barclays has agreed to pay a total of $6.3 million to resolve allegations that the UK-based bank violated the FCPA through employment practices in Asia.
The SEC alleges in an administrative proceeding that from 2009 until roughly August 2013, businesses within Barclays’ Asia-Pacific region (APAC) provided ‘valuable employment’ to relatives and friends of government officials and executives of Barclays’ non-government clients.
At least some of the offers of employment were extended as a personal benefit to those officials and executives with the expectation that the bank would receive or retain investment banking business, according to the agency.
Specifically, the SEC says Barclays during the period at issue hired roughly 117 job candidates referred by or connected to foreign government officials or non-government clients, most of whom were hired through an unofficial internship program called the ‘work experience program’ and some of whom were hired into Barclays’ formal internship program, its graduate program or permanent positions.
According to the commission, the bank failed to devise and maintain a system of internal accounting controls around its hiring practices that were sufficient to give reasonable assurances that its employees ‘were not using employment as an improper inducement in violation of company policy and the FCPA.’
Barclays’ APAC employees, in connection with certain of these alleged hires, falsified corporate records to conceal the true identity of the person or entity requesting that a candidate be hired and the reasons for the hire, the SEC says.
ANTI-BRIBERY POLICIES
Barclays had anti-bribery and anti-corruption policies that included prohibitions on providing employment in exchange for business, but between 2009 and 2013 it failed to effectively train APAC employees or monitor their compliance with those policies, the SEC alleges. APAC bankers and compliance personnel were unfamiliar with and did not understand these policies, particularly those related to hiring, according to the commission.
For example, the SEC says, an APAC senior executive claimed he did not know that offers of employment were items of value or that such offers could not be used to obtain business, and a banker who worked at Barclays’ business units in South Korea and Hong Kong from June 2005 to March 2017 said he was not aware of the FCPA until 2013.
APAC compliance officers were aware by no later than June 2009 of the practice of hiring interns, including the relatives and friends of clients, the SEC says. But to the extent compliance officers reviewed relationship-hiring requests, such reviews were generally limited to potential conflicts of interest despite an April 2009 Barclays policy that expressly addressed anti-corruption risks related to these hiring decisions, according to the regulator.
The SEC says APAC compliance officers stated they were unaware of this aspect of the policy, and a senior APAC compliance executive said he had never read the 2009 anti-bribery and corruption policy. In addition, relationship hires in the region were, at times, made without consulting the compliance department and in some cases, when compliance was consulted, employees withheld information or falsified documents to conceal the identity of the person or entity requesting the hire, according to the agency. At other times, compliance approved hires even in circumstances where employees ‘candidly identified that the justification for the relationship hire was the potential for future business,’ the SEC alleges.
‘Even though Barclays recognized the corruption risks of relationship hiring and had policies prohibiting its employees from using offers of employment to obtain business or gain a business advantage, it failed to devise and maintain a sufficient system of internal accounting controls to provide reasonable assurances that its employees did not engage in unauthorized transactions in contravention of corporate policy,’ the SEC states. ‘Although it promulgated written policies, Barclays failed to implement them adequately.’
Barclays settled the SEC’s action without admitting or denying wrongdoing. A spokesperson for the bank declined to comment.
Under the terms of the settlement, the bank must pay a $1.5 million civil penalty, $3,824,686 in disgorgement and $984,040 in prejudgment interest.
The agency notes that, in reaching the agreement, it took into consideration Barclays’ self-reporting, co-operation and remedial acts. According to the SEC, Barclays voluntarily reported the conduct at issue and, before the commission’s investigation, undertook remedial steps including terminating senior executives and other employees involved in the alleged misconduct, revising its hiring policies and procedures and enhancing its compliance programs.
The bank’s co-operation included making employees available for interview, providing facts developed during the course of its own internal investigation, providing presentations regarding its hiring practices and voluntarily producing ‘voluminous records’ including detailed spreadsheets related to specific hires and key document binders.
In a similar case, Deutsche Bank in August agreed to pay more than $16 million to settle claims it violated the FCPA through recruitment practices outside the US. The SEC alleged in that administrative proceeding that the bank between at least 2006 and 2014 gave ‘valuable employment’ to relatives of foreign government officials in various parts of the world as a personal benefit to those officials in order to ‘improperly influence’ them into helping Deutsche Bank get or retain business or other benefits.
Deutsche Bank also settled without admitting or denying wrongdoing.
Ben Maiden
Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...
