‘Dear CEO letter’ and Aon fine did not prompt full implementation of corruption controls
Willis’s anti-bribery controls continued to be inadequate despite two stark, industry-wide warnings, the company’s FSA Register filing reveals.
The failure to live up to the warnings was one of the reasons Willis was fined so heavily, it emerges from the filings. The FSA fined Willis Limited, the UK legal entity of Willis Group Holdings, a record £6.9m after it found the broker’s anti-bribery and corruption controls on overseas payments lacking between January 2005 and December 2009.
The FSA found no evidence that Willis Limited was involved in illicit payments, but rather that its anti-bribery and corruption controls were insufficient.
The FSA also revealed that Willis had taken disciplinary action against staff who it alleged had been involved in making potentially inappropriate payments or who failed to comply with Willis’s foreign payment policy.
Current Willis Limited chief executive Brendan McManus was not in charge during the period under review. However, McManus has been chief executive of Willis UK since 2007. He assumed control of Willis Limited in May this year from former Heath Lambert chief executive David Margrett, who went on to head Willis International. Margrett in turn took the role at Willis Limited following the retirement of Richard Bucknall in March 2007.
Willis was first warned, along with all wholesale brokers, in November 2007 when the FSA sent out a ‘Dear CEO’ letter, according to the disciplinary history section of Willis Limited’s entry in the FSA Register.
The letter affirmed the FSA’s expectations on payments to third parties and informed brokers that it expected them to review their business practices to ensure that they were not involved in, or associated with, illicit payments.
Then, in January 2009, the FSA fined Aon Limited, the corresponding UK legal entity at rival broking group Aon Corporation, £5.25m for failing to take reasonable care to establish and maintain effective anti-bribery and corruption controls for overseas payments. In Aon’s case, the infractions took place between January 2005 and September 2007.
In mitigation, the FSA said at the time of the ‘Dear CEO’ letter that Willis Group had begun a review of its existing policies payments to overseas third parties, with a view to developing new policies. These new policies were then introduced in August 2008.
The watchdog also pointed out that, at the time of the Aon fine, Willis had taken “some steps” to review the effectiveness of the policy introduced in 2008.
But the regulator added: “Notwithstanding the ‘Dear CEO’ letter and the Aon fine, there continued to be failings in Willis Limited’s implementation of these policies as described above up until May 2009.”
The FSA listed Willis’s continued failings despite the letter and the Aon fine as one of the reasons it considered the broker’s failings so serious, and thus why they merited a “significant financial penalty”.
The FSA also deemed the Willis case serious, as Willis Limited is “one of the largest insurance and reinsurance brokerage and risk management firms in the UK”, the failings mainly existed in two of the company’s major business units for a significant period, and the company earned £59.7m in gross commission from business introduced by overseas parties in high-risk jurisdictions. Of this, Willis paid £27m in commission to overseas parties.
Observers say the fine the FSA imposed on Willis sends out a strong message to the market. “This shows that this is very much a two-pronged attack in respect to compliance,” Pinsent Masons barrister Benjamin Long said. “This shows the strength of the FSA’s reach and powers.” He added that the FSA is likely to take the lead on tackling potential bribery and corruption in financial services.
Willis agreed to settle at an early stage of the FSA’s investigation, which entitled it to a 30% discount on its fine. Without this, it would have paid £9.85m. McManus said: “We will only accept the very best practice in the systems and controls we apply to our operations. We recognise the importance of such measures in assuring ourselves and stakeholders that the risk of wrongdoing is designed out of the way we do business.”
“When we discovered some of our businesses had not got that right in the past, we were swift to engage with the FSA towards today’s regulatory resolution.”