Jurisdiction - Hong Kong
Reports and Analysis
Hong Kong – The Compliance Bargain.

28 November, 2012


Legal News & Analysis – Asia Pacific – Hong Kong – Regulatory & Compliance


Far-reaching anti-corruption and anti-money laundering legislation means businesses need to invest more than ever in risk management. But they may not realise there is a pay-off.


Businesses in Asia are coming under increasing pressure to properly coordinate their internal compliance procedures and make sure they maintain high standards. But for some, this is still seen as a hindrance and unnecessary bureaucracy.


At the recent inaugural compliance summit organised by Haymarket Asia at the Conrad Hotel in Hong Kong, panellists discussed how to develop internal compliance procedures, what to do if and when things go wrong, and how to inspire employees to comply with globally effective legislation such as the US Foreign Corrupt Practices Act and Foreign Account Tax Compliance Act, and the UK Bribery Act. 


Luis Hui, compliance director at Microsoft China, explained what can be done if due diligence flags up a problem: “One of the things we do is a post mortem process where we go in and evaluate what went wrong, where. But also we could evaluate the partnership contract which contains a termination clause whereby we can terminate if the partner is not doing well in compliance.” 


Rodney Chen, MTR Corporation’s principal legal adviser, was asked what steps could be taken when there is more than a mere indication that something is awry. “The key thing is to remain calm! But more importantly you’ve got to become more careful in terms of what you’re looking at,” he answered. “Start exploring a bit more and looking at businesses which may not be directly extended to the wealth transaction. You may start expanding the team, looking at different sort of transactions that may have been affected by this and I think it’s being more diligent in terms of what you’re investigating, but with focus”.


One of the issues facing many compliance officers is justifying their presence: some boards view things only from a risk versus profit perspective. But several panellists said their experience was that both company directors and employees respect high compliance standards and appreciate their commercial value. 


“Compliance not having enough say [or] not having a loud enough voice in the company can be a problem, but from my experience we do have a loud voice; we are listened to,” said Steve Tarrant, executive director for Asia at Goldman Sachs. 


Another panellist acknowledged that establishing open lines of communication and nurturing the relationship between compliance and staff within the organisation is both useful and important.


One delegate asked how small companies are supposed to comply with large companies’ compliance requests, as this can be a huge burden. 


One panellist explained that having a code of conduct and anti-corruption policy is a minimum standard that even small companies should be able to comply with, otherwise it will raise a red flag for the organisation that is asking for compliance procedures to be adhered to.


One compliance officer later added: “Once there is a legal obligation, you have to discharge it. If you can ring-fence the issue and not report it that is ok but you can’t always do that.” The advice was to stay close to legal counsel and be aware of how liability is managed. 


But compliance is not just about conducting due diligence in the work place and ensuring that global procedures are implemented and policed effectively. Corruptive practice is a key reason for having compliance procedures.  


As director of public prosecutions Kevin Zervos explained, in Hong Kong, corruption is policed in both the public and private sectors. Here, the issue is not just one of criminal behaviour: it is also about social corruption, meaning community education is vital. 


“I have an obligation to ensure there is public support and confidence that I’m out there explaining to the community how the law works, how the criminal justice system operates – taking the mystique out of the criminal justice system, so people are more familiar with it, understand it and hopefully they will steer away from crime rather than into it,” he said. 


The Hong Kong department of justice is clearly committed to the fight against corruption: Zervos, speaking figuratively, said he is in court virtually every day prosecuting white collar crime. 


Businesses would be well advised to reflect on their internal compliance procedure and anti-bribery policies given this level of commitment from Hong Kong law enforcement. And remember, compliance officers are a bargain. 



For further information, please contact:


Scherzade Westwood, Conventus Law

[email protected]



Follow Conventus Law on Twitter @conventuslaw


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