The UK arm of Aon, the insurance group, was hit with a £5.25m fine yesterday for failing to maintain effective systems to counter the risks of bribery and corruption.
The levy is the first of its kind by the Financial Services Authority (FSA), and the sixth largest in the regulator's history.
The ruling does not claim that Aon either definitely engaged in bribery to secure overseas business, or that the company knew that such activities could be taking place. But "suspicious payments" of around $7m (£4.6m) were paid to both businesses and individuals in six countries including Bangladesh, Burma and Vietnam - payments that could have been used for bribes, says the FSA.
While it is not unusual for companies to make payments to third parties, particularly abroad, the countries Aon was working in should have called for greater scrutiny so the group was absolutely sure bribery or corruption was not taking place. Margaret Cole, the FSA's director of enforcement, said: "This is the largest financial crime related fine imposed by the FSA to date and it sends a clear message to the UK financial services industry that it is completely unacceptable for firms to conduct business overseas without having in place appropriate anti-bribery and corruption systems and controls."
A total of 66 transfers were made between January 2005 and September 2007. Aon co-operated fully with the FSA investigation, and qualified for a 30 per cent discount from the full fine of £7.5m. The regulator is keen to use the case to send out a warning to all institutions to take the necessary steps to keep track of their activities. A call to all insurance companies to scrutinise their operations for similar oversights, sent out by the FSA in November 2007, is now being followed up by an industry-wide report.
"The involvement of UK financial institutions in corrupt or potentially corrupt practices overseas undermines the integrity of the UK financial services sector," Ms Cole said. "The FSA has an important role to play in the steps being taken by the UK to combat overseas bribery and corruption. We have worked closely with other law enforcement agencies in this case and will continue to take robust action focused on firms' systems and controls in this area."
Legal experts said the judgment highlights the need for broader anti-corruption laws in unregulated business sectors.
James Bagge, a consultant for Norton Rose, said: "This is a very interesting but perhaps, in the current climate, not an unexpected use of the FSA's powers of enforcement in the fight against corruption. The Serious Fraud Office must be looking forward to the day when the new corruption laws recommended by the Law Commissioners which would allow the prosecution of companies which had taken insufficient measures to prevent corrupt activity by their employees or agents."Reuse content