Bribery, Corruption and Market Abuse
Financial crime is not limited to fraud and money laundering.
It can also include:
- bribery
- corruption
- insider dealing
- market manipulation
Therefore, financial firms need controls to reduce these risks.
For mortgage advisers, some of these issues may arise less often than fraud or money laundering.
However, they are still important.
The basic principle is simple:
Financial decisions should be honest, fair and free from improper influence.
What Is Bribery?
Bribery involves offering, giving, requesting or receiving an advantage to influence behaviour improperly.
For example, the advantage could be:
- money
- a gift
- entertainment
- a favour
- another benefit
Therefore, a bribe does not always involve an envelope full of cash.
Instead, the key issue is improper influence.
The Bribery Act 2010
The main UK law in this area is the:
Bribery Act 2010
It created important bribery offences.
These include:
- bribing another person
- being bribed
- bribing a foreign public official
- a commercial organisation failing to prevent bribery
Therefore, the law covers both giving and receiving bribes.
Bribing Another Person
One offence involves offering, promising or giving a financial or other advantage where the required conditions for improper performance are met.
In simple terms:
Do not offer someone a benefit to make them act improperly.
For example, imagine a person offers money to influence a business decision unfairly.
That could create a bribery issue.
Being Bribed
Bribery also works in the other direction.
A person may commit an offence by requesting, agreeing to receive or accepting an improper advantage in circumstances covered by the Act.
Therefore:
Giving a bribe can be an offence.
Meanwhile:
Receiving a bribe can also be an offence.
This distinction is easy to remember.
A Mortgage Example
Imagine an estate agent tells a mortgage adviser:
I’ll send all my buyers to you if you secretly pay me £500 for each mortgage.
A referral arrangement is not automatically illegal.
However, secret payments designed to influence behaviour improperly could create serious problems.
Therefore, advisers should follow firm rules on:
- referrals
- commissions
- fees
- conflicts of interest
Transparency matters.
Referral Fees Are Not Automatically Bribes
This point is important.
Businesses can have genuine referral arrangements.
For example, an estate agent may refer customers to a mortgage broker.
However, the arrangement should be:
- lawful
- properly recorded
- transparent where required
- consistent with FCA rules
Therefore:
Payment does not automatically equal bribery.
The purpose and circumstances matter.
Gifts and Hospitality
Businesses sometimes give or receive:
- gifts
- meals
- event tickets
- hospitality
These are not automatically bribes.
For example, a modest business lunch may be perfectly normal.
However, problems may arise if the gift is intended to influence a decision improperly.
Therefore, firms often have clear policies covering gifts and hospitality.
A Gift Example
Imagine a lender representative gives an adviser a small promotional diary.
That is unlikely to create the same concern as:
An expensive overseas holiday offered in return for directing customers to that lender.
Therefore, context matters.
A useful question is:
Could this benefit improperly influence the decision?
Bribing Foreign Public Officials
The Bribery Act also includes a specific offence involving bribery of foreign public officials.
For example, someone might offer money to an overseas official to gain a business advantage.
Therefore, UK bribery law can matter in international business as well as domestic activity.
Companies Can Also Be Responsible
The Bribery Act created an offence for commercial organisations that fail to prevent bribery by associated persons in circumstances covered by the Act.
Therefore, firms need suitable anti-bribery controls.
For example, these may include:
- policies
- staff training
- risk assessments
- monitoring
- reporting procedures
As a result, preventing bribery is not only an individual responsibility.
What Is Corruption?
Corruption is a broader idea.
It generally involves abusing power or a position for improper benefit.
For example, corruption may involve:
- bribery
- secret payments
- abuse of authority
- favouritism for improper gain
Therefore:
Bribery is one form of corruption.
However, corruption can be wider than bribery alone.
A Simple Corruption Example
Imagine someone responsible for awarding contracts gives work to a friend’s company.
In return, they secretly receive money.
That may involve both:
- corruption
- bribery
Therefore, the two ideas often overlap.
Why Does Corruption Matter?
Corruption damages trust.
In addition, it can:
- distort decisions
- increase costs
- reward dishonest behaviour
- harm customers
- damage competition
Therefore, financial firms need to make decisions for proper reasons.
This includes decisions about:
- products
- suppliers
- referrals
- customers
- business partners
Conflicts of Interest
Bribery and corruption can also connect with conflicts of interest.
A conflict exists when someone’s personal interest may affect their professional judgement.
For example, an adviser may receive more money for recommending one product rather than another.
That does not automatically mean the adviser has acted wrongly.
However, the conflict needs to be managed properly.
Therefore:
Customer interests should not be pushed aside for personal gain.
A Mortgage Conflict Example
Imagine:
Mortgage A
is more suitable for the customer.
However:
Mortgage B
pays the adviser more commission.
The adviser should not recommend Mortgage B simply because it pays more.
Therefore, the recommendation should be based on the customer’s needs.
This links directly with FCA conduct standards and Consumer Duty.
What Is Market Abuse?
Market abuse relates mainly to behaviour in financial markets.
Therefore, it is different from mortgage fraud or bribery.
It can involve behaviour such as:
- insider dealing
- unlawful disclosure of inside information
- market manipulation
The UK has rules designed to protect the fairness and integrity of financial markets.
Why Is Market Abuse Regulated?
Financial markets work best when people can trust them.
However, that trust can be damaged if someone:
- trades using secret information
- spreads false information
- manipulates prices
Therefore, market-abuse rules aim to keep markets fair.
In simple terms:
Nobody should gain an unfair market advantage through improper behaviour.
What Is Inside Information?
Inside information is information that meets specific legal tests.
Broadly, it involves information that:
- is not public
- is precise
- relates directly or indirectly to certain financial instruments or issuers
- would be likely to have a significant effect on price if made public
Therefore, not every private piece of information is inside information.
The legal definition matters.
A Simple Inside Information Example
Imagine a senior employee knows that a listed company is about to announce a major takeover.
The public does not know yet.
The announcement is likely to affect the company’s share price.
Therefore, that information may be inside information.
What Is Insider Dealing?
Insider dealing can happen when someone uses inside information to deal in relevant financial instruments.
For example:
Person learns secret price-sensitive information
↓
Buys shares before the information becomes public
↓
Price rises after the announcement
↓
Person profits
This can create a serious market-abuse issue.
Therefore:
Do not use inside information to gain an unfair trading advantage.
Inside Information Should Not Be Shared Improperly
Another issue is the improper disclosure of inside information.
For example, someone may tell a friend:
Buy these shares before Friday. I know something big is about to happen.
Even if the person does not trade themselves, sharing the information may create problems.
Therefore:
Do not improperly pass inside information to someone else.
Market Manipulation
Market manipulation involves behaviour that gives false or misleading signals about the market or otherwise manipulates market prices in circumstances covered by the rules.
For example, someone may try to create a false impression that:
- demand is increasing
- a company is performing better than it is
- an asset is more valuable than it really is
Therefore, other investors may make decisions based on a false picture.
A Simple Manipulation Example
Imagine someone owns shares in a small company.
They then spread false claims online:
Huge takeover announcement tomorrow!
Other people buy the shares.
As a result, the price rises.
The original person then sells at a profit.
That could create a serious market-manipulation issue.
False Information Can Harm Markets
Markets depend heavily on information.
Therefore, false information can influence:
- prices
- investment decisions
- confidence
As a result, deliberately spreading false or misleading information can be serious.
This is especially important today because information can spread quickly through social media.
Social Media and Market Abuse
A social media post can reach thousands of people within minutes.
Therefore, online behaviour can affect financial markets.
For example, someone should not deliberately spread false claims to move the price of an investment.
Likewise, someone should not improperly reveal inside information online.
Therefore:
Online behaviour is not outside financial regulation.
Market Abuse and Mortgage Advisers
Most mortgage advisers do not regularly trade securities as part of their work.
Therefore, market abuse may seem less relevant than mortgage fraud.
However, advisers still work within financial services.
In addition, some may work for larger financial groups or have access to private business information.
Therefore, the basic principles remain important.
A Mortgage Adviser Example
Imagine an adviser works for a large listed banking group.
During an internal meeting, they learn confidential information about a major event that could affect the company’s share price.
The information has not been made public.
The adviser should not use that information to trade.
Likewise, they should not pass it to friends or relatives.
Therefore, confidential market information needs to remain protected.
Market Abuse Is Not the Same as Fraud
These terms can overlap.
However, they are not identical.
Fraud
Usually involves dishonest behaviour designed to create a gain or cause a loss.
Meanwhile:
Market Abuse
Focuses on improper behaviour affecting financial markets.
Therefore:
Fraud → Dishonest financial behaviour
Market abuse → Improper market behaviour
The exact legal rules then determine which offence or breach may apply.
Bribery Is Also Different
Bribery has another focus.
It involves improper influence through an advantage.
Therefore:
Bribery → Improper influence
Fraud → Dishonest gain or loss
Market abuse → Improper market behaviour
Keeping these ideas separate makes them easier to remember.
Whistleblowing
Sometimes an employee may discover serious wrongdoing inside a firm.
For example:
- fraud
- bribery
- market abuse
- other misconduct
Therefore, firms may have whistleblowing procedures.
These allow concerns to be raised through suitable channels.
What Is Whistleblowing?
Whistleblowing involves a worker raising certain concerns about wrongdoing.
For example, an employee may discover that another employee is deliberately creating false mortgage applications.
Rather than ignoring it, they may raise the concern through the proper process.
Therefore:
Serious wrongdoing should not simply be hidden.
Follow the Firm’s Procedures
If an adviser notices possible bribery, corruption or market abuse, they should not try to conduct their own investigation.
Instead:
Notice the concern
↓
Keep relevant information
↓
Follow firm procedures
↓
Escalate appropriately
This is similar to the approach used for other forms of financial crime.
Do Not Make Accusations Without Evidence
A warning sign is not proof.
For example, receiving a gift does not automatically mean someone has taken a bribe.
Likewise, knowing confidential information does not automatically mean someone has committed insider dealing.
Therefore:
Notice concerns without jumping to conclusions.
Then, follow the proper process.
Keep Accurate Records
Good records can help show what happened.
For example, firms may record:
- gifts
- hospitality
- conflicts of interest
- referrals
- concerns raised
Therefore, record keeping supports good governance.
It can also help show that decisions were made properly.
Bribery and Firm Culture
Rules alone cannot prevent every problem.
Therefore, firm culture also matters.
For example, managers should not create pressure such as:
Get the deal done however you have to.
Instead, staff should understand that:
- honesty matters
- rules matter
- customer interests matter
- concerns can be raised
As a result, good culture helps reduce financial crime.
Incentives Can Create Risk
Bonuses and commissions can influence behaviour.
However, incentives are not automatically wrong.
The problem appears when they encourage poor conduct.
For example:
More sales
↓
Higher bonus
may create pressure to ignore customer needs.
Therefore, firms should design incentives carefully.
A Mortgage Incentive Example
Imagine an adviser receives a much larger reward for recommending one lender.
However, another lender offers a better mortgage for the customer.
The adviser should still recommend the suitable option.
Therefore:
Personal reward should not override the customer’s interests.
Gifts Should Be Considered Carefully
A useful question is:
Why is this gift being offered?
For example:
Small thank-you gift
may be innocent.
However:
Large secret payment linked to a business decision
creates a very different concern.
Therefore, context and purpose matter.
A Full Mortgage Example
Imagine a property developer regularly sends customers to a mortgage adviser.
Then, the developer says:
I’ll keep sending customers to you, but I want £1,000 secretly paid to me for every completed mortgage. Don’t put it through the firm’s normal system.
Several warning signs appear:
Secret payment
↓
Business influence
↓
Request to avoid normal controls
Therefore, the adviser should not simply agree.
Instead, they should follow firm procedures and raise the concern appropriately.
A Simple Adviser Process
If something appears improper:
Notice
What exactly has happened?
↓
Consider
Could there be a genuine explanation?
↓
Do Not Participate
Do not help carry out improper behaviour.
↓
Record
Keep relevant information.
↓
Escalate
Follow the firm’s process.
This provides a simple professional approach.
What Should an Adviser Avoid?
Avoid:
- offering improper payments
- accepting improper benefits
- hiding conflicts
- using inside information
- spreading false market information
- ignoring serious misconduct
- investigating matters personally
Therefore:
Act honestly and follow proper procedures.
A Simple Memory Aid
Remember:
Bribery
Improper influence
↓
Corruption
Abuse of power
↓
Insider Dealing
Improper use of inside information
↓
Market Manipulation
Creating a false or distorted market
This helps keep the four ideas separate.
Key Terms to Remember
Bribery
Offering, giving, requesting or receiving an advantage in circumstances involving improper behaviour.
Bribery Act 2010
The main UK legislation dealing with bribery offences.
Corruption
Abuse of power or position for improper benefit.
Conflict of Interest
A situation where personal interests may affect professional judgement.
Market Abuse
Improper behaviour relating to financial markets.
Inside Information
Non-public information meeting the legal tests for inside information.
Insider Dealing
Using inside information to deal in relevant financial instruments in circumstances covered by the rules.
Unlawful Disclosure
Improperly passing inside information to another person.
Market Manipulation
Behaviour that improperly gives false or misleading market signals or distorts prices.
Whistleblowing
Raising certain concerns about wrongdoing through suitable channels.
Quick Knowledge Check
1. What is bribery?
Offering, giving, requesting or receiving an advantage to influence behaviour improperly.
2. What is the main UK bribery law?
The Bribery Act 2010.
3. Can receiving a bribe be an offence?
Yes. Both giving and receiving bribes can create offences.
4. Are all gifts and hospitality bribes?
No. The purpose and circumstances matter.
5. What is corruption?
Broadly, the abuse of power or position for improper benefit.
6. What is market abuse?
Improper behaviour affecting financial markets.
7. What is inside information?
Broadly, precise non-public information that meets the legal tests and could significantly affect the price of relevant financial instruments if made public.
8. What is insider dealing?
Using inside information to deal in relevant financial instruments in circumstances covered by market-abuse rules.
9. What is market manipulation?
Behaviour that improperly creates false or misleading market signals or distorts prices.
10. Should an adviser investigate suspected bribery or market abuse personally?
No. They should follow firm procedures and escalate concerns appropriately.
Quick Summary
Bribery, corruption and market abuse are different forms of wrongdoing.
Therefore, it helps to keep them separate.
Remember:
Bribery → Improper influence
Meanwhile:
Corruption → Abuse of power
Then:
Insider dealing → Improper use of inside information
Finally:
Market manipulation → Distorting the market
For mortgage advisers, bribery and conflicts of interest may be particularly relevant when dealing with:
- commissions
- referrals
- gifts
- hospitality
- business relationships
Therefore, advisers should always ask:
Could this benefit improperly influence my decision?
Likewise, confidential information should never be used for improper personal gain.
So, if something appears wrong:
Notice → Do not participate → Record → Escalate
Most importantly:
A customer’s interests and professional judgement should never be secretly bought or influenced.
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