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FEDERAL RESERVE BANK
OF NEW YORK
[circular No. 1017ll
May 26, 1987 _ j
BANK BRIBERY ACT
Proposed Board GuideSines
To All State Member Banks and Bank Holding Companies
in the Second Federal Reserve District:
The B oard o f G overnors o f the Federal Reserve System has issued for com m ent a set
o f guidelines th a t w ould encourage all State m em ber banks and b ank holding com panies
to ad o p t codes o f conduct or w ritten policies th at w ould describe and explain the general
prohibitions o f the bank bribery law (Bank Bribery A m endm ents A ct o f 1985,
P A . 99-370, A ugust 4, 1986).
E nclosed — for m em ber banks and bank holding com panies — is the text o f the
B o ard ’s proposal. C om m ents thereon should be subm itted by July 21, 1987 to the B oard
o f G overnors, as indicated in the B o ard ’s notice, or to our C om pliance E xam inations
D epartm ent. Copies o f the enclosure, which is published in the Federal Register of
M ay 22 (52 FR 19396), will be furnished to others upon request directed to the C irculars
D ivision o f this B ank (Tel. N o. 212-720-5215 or 5216).
E. G e r a l d C o r r i g a n ,
President.
FEDERAL RESERVE SYSTEM
(Docket No. R-0603)
Proposed Guidelines
Regarding the Bank Bribery Act
AGENCYs
Board of Governors of the Federal Reserve System.
ACTIONs
Proposed Guidelines.
SUMMARY:
The Bank Bribery Amendments Act of 1985 requires that
Federal agencies with responsibility for regulating financial
institutions establish guidelines to assist financial institution
officials in complying with this law.
The proposed guidelines
were developed by the Interagency Bank Fraud Enforcement Working
Group.
In accordance with a recommendation from the Federal
Financial Institutions Examination Council, the guidelines
proposed by the Board of Governors of the Federal Reserve System
(the "Board of Governors")
encourage all state member banks and
bank holding companies to adopt codes of conduct or written
policies that describe the prohibitions of the bank bribery law.
The guidelines also identify situations that, in the opinion of
the Board of Governors, do not constitute violations of the
Federal bank bribery law.
The proposed guidelines suggest, inter alia, that state
member banks and bank holding companies themselves establish, in
their own codes of conduct or written policies, a range of
internally acceptable dollar amounts for the various benefits
that their officials may receive from those doing or seeking to
do business with them.
[Enc.
Cir.
No.
10171]
In the proposed guidelines, the Board of
2
Governors has not set any specific dollar amounts for
entertainment, meal or gift expenses.
With regard to this issue,
the Board of Governors seeks comment from the public concerning
whether the establishment by the Board of Governors of specific
dollar limits or ranges will further assist compliance with the
requirements of the Bank Bribery Act and, if so, what amounts
should be set.
The Board of Governors would also be interested
in knowing whether the location, size and nature of a financial
institution's business should be taken into consideration in the
establishment of appropriate dollar limits or ranges.
DATEs
Comments must be received on or before July 21, 1987.
ADDRESS?
Interested parties are invited to submit written
comments to William W» Wiles, Secretary of the Board, Board of
Governors of the Federal Reserve System, 20th and Constitution
Avenue, N.W., Washington, D„Co 20551, or to deliver such comments
to the guard station in the Eccles Building Courtyard on 20th
Street, N „ W 0 (between Constitution Avenue and C Street, N.W.)0
Written comments should refer to Docket No. R-0603o
Comments
received may be inspected in Room B-1122 between 8?45 a 0m 0 and
5 s15 p.m. weekdays, except as provided in section 261.6 (a) of the
Board's Rules Regarding Availability of Information
section 261.6(a))„
(12 CFR
3
FOR FURTHER INFORMATION CONTACT:
Herbert A. Biern, Assistant
Director, Enforcement Section, Division of Banking Supervision
and Regulation
(202/452-2620); Mary P. Johannes, Attorney,
Enforcement Section, Division of Banking Supervision and
Regulation
(202/452-3953); or for the hearing impaired only,
Telecommunications Device for the Deaf ("TDDn), Earnestine Hill
or Dorothea Thompson (202/452-3544), Board of Governors of the
Federal Reserve System, Washington, D.C. 20551.
SUPPLEMENTARY INFORMATION:
Background
The Comprehensive Crime Control Act of 1984
(P.L.
98-473, Title 11, October 12, 1984) amended the Federal bank
bribery law, 18 U.S.C. section 215, to prohibit employees,
officers, directors, agents and attorneys of financial
institutions from seeking or accepting anything of value in
connection with any transaction or business of their financial
institution.
(The definition of a "financial institution" under
the law includes a bank and a bank holding company.)
The amended
law also prohibited anyone from offering or giving anything of
value to employees, officers, directors, agents or attorneys of
financial institutions for or in connection with any transaction
or business of the financial institution.
Because of its broad
scope, the 1984 Act raised concerns that it might have made what
is acceptable conduct unlawful.
4
In July 1985, the Department of Justice issued a Policy
Concerning Prosecution Under the New Bank Bribery Statute.
In
that Policy, the Department of Justice discussed the basic
elements of the prohibited conduct under section 215, and
indicated that cases to be considered for prosecution under the
new bribery law entail breaches of fiduciary duty or dishonest
efforts to undermine financial institution transactions.
Because
the statute was intended to reach acts of corruption in the
banking industry, the Department of Justice expressed its intent
not to prosecute insignificant gift giving or entertaining that
does not involve a breach of fiduciary duty or dishonesty.
Congress decided that the broad scope of the statute
provided too much prosecutorial discretion.
Consequently,
Congress adopted the Bank Bribery Amendments Act of 1985
(P.L.
99-370, August 4, 1986) to narrow the scope of 18 U.S.C. section
215 by adding a new element, namely, an intent to corruptly
influence or reward an officer in connection with financial
institution business.
As amended, section 215 provi-des in
pertinent parts
Whoever"(1) corruptly gives, offers, or promises
anything of value to any person, with intent to
influence or reward an officer, director,
employee, agent, or attorney of a financial
institution in connection with any business or
transaction of such institution; or
5
(2)
as an officer, director, employee, agent,
or attorney of a financial institution, corruptly
solicits or demands for the benefit of any person,
or corruptly accepts or agrees to accept, anything
of value from any person, intending to be
influenced or rewarded in connection with any
business or transaction of such institution; shall
be guilty of an offense "
The law now specifically excepts the payment of bona
fide salary, wages,
fees, or other compensation paid, or expenses
paid or reimbursed,
in the usual course of business.
This
exception is set forth in subsection 2 1 5 (c).
The penalty for a violation remains the same as it was
under the 1984 Act.
If the value of the thing offered or
received exceeds $100, the offense is a felony punishable by up
to five years imprisonment and a fine of $5,000 or three times
the value of the bribe or gratuity.
If value does not exceed
$100, the offense is a misdemeanor punishable by up to one year
imprisonment and a maximum fine of $1,000.
In addition, the law now requires the financial
institution regulatory agencies to publish guidelines to assist
employees, officers, directors, agents and attorneys of financial
institutions to comply with the law.
The legislative history of
the 1985 Act makes it clear that the guidelines would be relevant
to but not dispositive of any prosecutive decision the Department
of Justice may make in any particular case.
(daily ed. Feb. 4, 1986).
132 Cong. Rec. 5944
Therefore, the guidelines developed by
6
the financial regulatory agencies are not a substitute forithe
il
legal standards set forth in the statute.
^
Nonetheless, in
adopting its own prosecution policy under the bank bribery
statute, the Department of Justice can be expected to take into
account the financial institution regulatory agency's expertise
and judgment in defining those activities or practices that the#
agency believes do not undermine the duty of an employee,
officer, director, agent or attorney to the financial
institution.
United States Attorneys' Manual section 9-40.439.
Proposed Guidelines
The proposed guidelines encourage all state member
banks and bank holding companies to adopt internal codes of
conduct or written policies or amend their present codes of
conduct or policies to include provisions that explain the
general prohibitions of the bank bribery law.
The proposed
guidelines relate only to the bribery lav/ and do not address
other areas of conduct that a state member bank or bank holding
company would find advisable to cover in its code of conduct or
written policy.
The code or policy should prohibit, consistent
with the statute, any employee, officer, director, agent or
attorney of a state member bank or bank holding company
(hereinafter "Bank or Bank Holding Company Official" or "Bank or
Bank Holding Company Officials")
themselves or for a third party
from (1) soliciting for
(other than the bank or bank
holding company itself) anything of value from anyone in return
7
for any business, service or confidential information of the bank
or bank holding company and from (2) accepting anything of value
(other than normal authorized compensation)
from anyone in
connection with the business of the bank or the bank holding
company, either before or after a transaction is discussed or
consummated.
The state member banks' and bank holding companies'
codes or policies should be designed to alert Bank or Bank
Holding Company Officials about the bank bribery statute, as well
as to establish and enforce standards relating to acceptable
business practices.
In its code of conduct or written policy, the state
member bank or bank holding company may, however, specify
appropriate exceptions to the general prohibition of accepting
something of value in connection with bank or bank holding
company business.
There are a number of instances where a Bank
or Bank Holding Company Official, without risk of corruption or
breach of trust, may accept something of value from one doing or
seeking to do business with the bank or bank holding company.
The most common examples are the business luncheon or the holiday
season gift from a customer.
In general, there is no threat of a
violation of the statute if the acceptance is based on a family
or personal relationship existing independent of any business of
the institution; if the -benefit is available to the general
8
public under the same conditions on which it is available to the
Bank or Bank Holding Company Official; or if the benefit would be
paid for by the bank or bank holding company as a reasonable
business expense if not paid for by another party.
Indeed, by
adopting a code of conduct or written policy with appropriate
allowances for such circumstances, a state member bank or bank
holding company recognizes that acceptance of certain benefits by
its Bank or Bank Holding Company Officials does not amount to a
corrupting influence on the b a n k ’s or bank holding company's
transactions.
In issuing guidance under the statute in the area of
business purpose entertainment or gifts, it is not advisable for
the Board of Governors to establish rules about what is
reasonable or normal in fixed dollar terms.
What is reasonable
in one part of the country may appear lavish in another part of
the country.
A state member bank or bank holding company should
seek to embody the highest ethical standards in its code of
conduct or written policy.
In doing this, a state member bank or
bank holding company may establish in its own code or policy a
range of dollar values which cover the /arious benefits that its
Bank or Bank Holding Company Officials may receive from those
doing or seeking to do business with the bank or bank holding
company.
9
The code of conduct or written policy should provide
that, if a Bank or Bank Holding Company Official is offered,
receives, or anticipates receiving something of value from a
customer beyond what is expressly authorized in the bank's or
bank holding company's code of conduct or written policy, the
Bank or Bank Holding Company Official must disclose that fact to
an appropriately designated official of the financial
institution.
The state member bank or bank holding company
should keep contemporaneous written reports of such disclosures.
An effective reporting and review mechanism should serve to
prevent situations that might otherwise lead to implications of
corrupt intent or breach of trust and should enable the bank or
bank holding company to better protect itself from self-dealing.
However, a Bank or Bank Holding Company Official's full
disclosure evidences good faith only when such disclosure is made
in the context of properly exercised supervision and control.
Thus, the prohibitions of the bank bribery statute cannot be
avoided by simply reporting to management the acceptance of
various gifts unless management reviews'the disclosures and
determines that what is accepted is reasonable and does not pose
a threat to the integrity of the state memt 3r bank or bank
holding company.
The Board of Governors recognizes that a serious threat
to the integrity of a state member bank or bank holding company
occurs when its Bank or Bank Holding Company Officials become
10
involved in outside business interests or employment that gives
rise to a conflict of interest.
Such conflicts of interest may
evolve into corrupt transactions that are covered under the bank
bribery statute.
Accordingly, state member banks and bank
holding companies are encouraged to prohibit, in their codes of
conduct or policies, their Bank or Bank Holding Company Officials
from self-dealing or otherwise trading on their positions with
the bank or bank holding company or accepting from one doing or
seeking to do business with the bank or bank holding company a
business opportunity not generally available to the public.
In
this regard, a state member bank's or bank holding company's code
of conduct or policy should require that its Bank or Bank Holding
Company Officials disclose all potential conflicts of interest,
including those in which they have been inadvertently placed due
to either business or personal relationships with customers,
suppliers, business associates, or competitors of the bank or
bank holding company.
Exceptions
In its code of conduct or written policy, a state
member bank or bank holding company may describe appropriate
exceptions to the general prohibition regarding the acceptance of
things of value in connection with bank or bank holding company
business.
These exceptions may include those that?
11
(a)
permit the acceptance of gifts, gratuities,
amenities or favors based on obvious family or personal
relationships
(such as those between the parents,
children or spouse of a Bank or Bank Holding Company
Official) where the circumstances make it clear that it
is those relationships rather than the business of the
bank or bank holding company concerned which are the
motivating factor;
(b)
permit acceptance of meals, refreshments or
entertainment of reasonable value in the course of a
meeting or other occasion the purpose of which is to
hold bona fide business discussions
(the bank or bank
holding company may establish a specific dollar limit
for such an occasion);
(c)
permit acceptance of loans from other banks
or financial institutions on customary terms to finance
proper and usual activities of Bank or Bank Holding
Company Officials, such as home mortgage loans, except
where prohibited by law;
(d)
permit acceptance of advertising or
promotional material of nominal value, such as pens,
pencils, note pads, key chains, calendars and similar
items;
12
(e)
permit acceptance of discounts or rebates on
merchandise or services that do not exceed those
available to other customers;
(f)
permit acceptance of gifts of modest value
that are related to commonly recognized events or
occasions, such as a promotion, new job, wedding,
retirement, Christmas or bar or bat mitzvah
(the bank
or bank holding company may establish a specific dollar
limit for such an occasion); or
(g)
permit the acceptance of civic, charitable,
educational, or religious organizational awards for
recognition of service and accomplishment
(the bank or
bank holding company may establish a specific dollar
limit for such an occasion).
The policy or code may also provide that, on a case by
case basis, a state member bank or bank holding company may
approve of other circumstances, not identified above, in which a
Bar.k or Bank Holding Company Official accepts something of value
in connection with bank or bank holding company business,
provided that such approval is made in writing on the basis of a
full written disclosure of all relevant facts and is consistent
with the bank bribery statute,
13
Disclosures and Reports
To make effective use of these guidelines, the Board of
Governors recommends the following additional procedures:
(a)
The state member bank or bank holding company-
should maintain a copy of any code of conduct or written policy
it establishes for its Bank or Bank Holding Company Officials,
including any modifications thereof.
(b)
The state member bank or bank holding company
should require periodic written acknowledgment from its Bank or
Bank Holding Company Officials of its code or policy and the Bank
or Bank Holding Company Officials' agreement to comply therewith.
(c)
The state member bank or bank holding company
should maintain contemporaneous written reports of any
disclosures made by its Bank or Bank Holding Company Officials in
connection with a code of conduct or written policy.
Board of Governors of the Federal Reserve System,
May 18, 1987.
(signed) William W. Wiles
William W. Wiles
Secretary of the Board
@FedFRASER