Investment banks need to do more to implement effective anti-bribery and corruption systems and controls, the Financial Services Authority said today.
Publishing the findings of its thematic review into the systems and controls firms use, the regulator said it had found that, despite a long-standing regulatory requirement to mitigate the risk of financial crime, most firms needed to do more.
In particular, it found that most firms had not properly taken account of FSA rules covering bribery and corruption - either before or after the implementation of the 2010 Bribery Act.
Nearly half the 15 firms surveyed - a sample which included eight major global investment banks - did not have an adequate anti-bribery and corruption risk assessment, while management information on the issue was poor. This made it difficult for the FSA to see how firms' senior management could provide effective oversight.
Only two of the firms reviewed had either started or carried out specific ABC internal audits, and the FSA found 'significant issues' in firms' dealings with third parties used to win or retain business.
It also found that, while many firms had recently tightened up their gifts, hospitality and expenses policies, few had processes to ensure those they did receive in relation to particular clients or projects were reasonable on a cumulative basis.
Tracey McDermott, acting director of enforcement and financial crime at the FSA, said:'It is imperative that firms have adequate arrangements to control the risks of financial crime. We have seen examples of good practice and some examples of poor practice.
'Overall, despite the high profile of the issue, the investment banking sector has been too slow and too reactive in managing bribery and corruption risks.
Ms McDermott said the FSA - and its successor the Financial Conduct Authority - would continue to focus on financial crime risks to ensure firms were meeting their legal and regulatory obligations.
In response to the findings of the review, the FSA now plans to consult on proposed amendments to its regulatory guidance, Financial crime: a guide for firms. This proposed new guidance applies to all firms within the scope of its financial crime rules, not just investment banks.
It is also considering whether further regulatory action is required in relation to certain firms in its review.