Cross-Boundary Business Operations
Cross-boundary business operations may encounter corruption risks due to the differences in law, social environment, staff culture as well as problems relating to "remote management" of the business.
A case in point
- A senior merchandiser of a Hong Kong-based herbal tea manufacturing company is responsible for purchasing herbal materials from various Mainland suppliers.
- On several occasions, the senior merchandiser solicits loans from a Mainland herbal supplier in return for placing purchase orders with the latter.
- He also inflates the expenses incurred in his business trips and furnishes false receipts to deceive the company.
Yes. The senior merchandiser has committed offences under Section 9 of the POBO which deals with corruption crimes in private sector.
He has violated Section 9(1) of the POBO because he is an agent (i.e. an employee), who without the approval from his principal (i.e. the herbal tea manufacturing company), solicits an advantage (i.e. loans) from a supplier as an inducement for his doing an act in relation to his principal’s business (i.e. placing purchase orders with the supplier).
He has also violated Section 9(3) of the POBO for using false documents (i.e. furnishing false receipts with inflated expenses) to deceive his principal.
8 Life Hacks for Cross-boundary Business Management:
- Any act includes promising, agreeing, soliciting or accepting advantages without permission.
- Accepting bribes, whether directly or indirectly (e.g. through a third party), is against the POBO.
- If the corrupt transaction takes place in Chinese Mainland, it may violate the anti-bribery provisions in the Criminal Law and the Anti-Unfair Competition Law of the People’s Republic of China
- Don’t deal with any property if knowing or having reasonable grounds to believe that the property is involved in any criminal or money laundering activities.
Examples include the UK Bribery Act 2010 and US Foreign Corrupt Practices Act
View video
A Hong Kong listed company and a US-listed company with regional headquarters in the UK had a joint venture in the Mainland. The Chief Finance Officer noticed some red flags in the accounts and asked the assistant manager for explanation. The assistant manager said that he was instructed to send representatives of potential Mainland clients luxury goods in order to facilitate the procurement of contracts
VO = voice over
The secretary brought Liang Runqiu in.
Dennis： Mr Leung.
LIANG Runqiu： Mr Yeung.
Dennis： Have a seat. Mr Leung, let‘s cut to the chase. I have found something strange in the company‘s accounts. Why do we keep paying large consulting fees to a business consultant in the mainland? Can you explain this?
LIANG Runqiu： Mr Yeung. You know, Suntarks Foods (China) is a supplier for many upmarket hotels and corporations in China. Some of them are private organisations, some are state-owned. All these years, Brother Keung has instructed me to seek help from this consultant to build our relationships with the clients' representatives. Hence the consultant takes them out to nice high-end restaurants, wines and dines them, and gifts them jewellery. The consultant spends for us, so we have to pay the consultant. It wasn’t just approved by me. Brother Keung endorsed these fees too.
Dennis： Don’t you see anything wrong about it?
LIANG Runqiu： Brother Keung said it’s okay. I did question it at first. But he assured me, we were just entertaining and gifting in China. Hong Kong laws don’t apply. Brother Keung’s my superior. Of course I trust him. Besides, there was no one else I could turn to.
Dennis：（VO）Is there really no problem? Previously a multinational enterprise committed bribery in China. Mainland authorities, the US and the UK all took legal actions. Our partner Ganancia is listed in the US and has regional headquarters in both the UK and Hong Kong. The way we give gifts may cause troubles. When law enforcement agencies from different countries approach us, it will be too late to regret.
- Customs are no defence. According to POBO the offeror cannot offer bribes in excuse of 'an established custom in the trade' or 'trade practice'.
- Employees accepting frequent or lavish entertainment from suppliers/business partners may affect their objectivity in dealing with suppliers/business partners.
- Company should follow the legal requirements of the jurisdiction where the business operates and the company’s own business practices when drawing up a code of conduct.
- Hong Kong Business Ethics Development Centre assists business organisations in formulating or reviewing codes of conduct.
- Hong Kong Business Ethics Development Centre offers free anti-corruption and ethics training to local businesses in Hong Kong.
- Companies may use our business ethics resources to conduct ethics training for staff employed in other jurisdictions.
- The Hong Kong Business Ethics Development Centre publishes a variety of business ethics resources (for use by the companies to remind staff of the importance of upholding integrity.
- Download anti-corruption posters here.
