Last week BNY Mellon agreed to pay the SEC $14.8 million to settle charges that it violated the Foreign Corrupt Practices Act by awarding student internships to kids of officials connected with a sovereign wealth fund in the Middle East.
Hiring a family member or friend of a foreign official isn’t always a violation of the FCPA. But a hiring decision intended to reward or induce an official to award work can be an offense.
(The antibribery provisions of the FCPA prohibit giving or promising to give anything of value to a foreign official directly or indirectly to obtain or retain business.)
Internships and other jobs can be valuable. When the candidate is the child of a foreign official who has the influence to help the employer win or keep work, there could be an FCPA problem.
That doesn’t mean all princelings are off limits all the time.
Guidelines for fully compliant hiring can be distilled from last week’s BNY Mellon enforcement action.
Here’s our six:
First, the process. Keep the hiring process within the normal HR pathways and practices that apply to all other hires. Don’t create exceptions for princelings by letting sales people and business managers make hiring decisions on their own.
Second, the substance. Evaluate and hire family members of officials using the same standards that would apply to any other candidate. Don’t waive, modify, or lower the standards for education, experience, and so on for the princelings. Be consistent.
Third, the parents. If foreign officials are pushing you to hire their kids, tell them the discussion is out of bounds. BNY Mellon took the officials’ calls. That was a mistake. It’s OK for princelings to apply for internships and jobs on their own. It’s not OK for their parents or others connected to the parents to intervene.
Fourth, the controls. Know who’s responsible for screening candidates to uncover their connections to foreign officials. Have specific policies and procedures in place that cover the hiring of customers and relatives of customers, including foreign officials. Spell out what’s permitted and what’s not, who gets to make final hiring decisions, and what the criteria are.
Fifth, the training. Make sure human resources personnel and others can spot and flag potentially problematic hires. When clients, customers, and even internal sales people refer candidates for internships and other jobs, red flags should go up in the organization. That’s part of the internal controls the SEC talked about in the BNY Mellon action.
Sixth, the compliance folks. Lawyers and compliance officers were left out when BNY Mellon awarded internships to the kids of government officials. That was a mistake. A company lawyer or compliance officer should sign off on the award of all internships and other hires to confirm that everything has been done consistent with standard practices and that the hire isn’t a compliance problem.
The SEC said last week that firms need internal controls “tailored to the corruption risks inherent in the hiring of client referrals to adequately and fully effectuate a stated policy against the bribery of foreign officials.”
Translation: Apply your compliance program to all hiring decisions, train HR and others how to do that, and keep compliance personnel in the loop.
Final caveat — This post isn’t legal advice, it’s blogging. Before hiring a princeling, please check with your lawyers.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.