Hong Kong Ethics Development Centre. Welcome to Hong Kong!

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1 Welcome to Hong Kong! In this vibrant and cosmopolitan city, everyone is committed to maintaining Hong Kong s prosperity and success. Its business-friendly operational environment and level playing field will enable your business to thrive and grow. Most importantly, Hong Kong is consistently rated by international institutions as one of the least corrupt cities in the world. That s why many foreign investors, like you, are attracted to build their businesses and home lives here. This information pack provides you with an E-Compass (i.e. an Ethical Compass ) to point you in the right direction, and gives you the basics for starting your business smoothly in Hong Kong. Hong Kong Ethics Development Centre

2 Corruption, in any form, is not tolerated here Hong Kong s culture of clean and honest business is safeguarded, without bias or prejudice, by an independent and dedicated anti-corruption agency the Independent Commission Against Corruption (ICAC). Set up in 1974, the ICAC is a law-enforcement agency empowered to seek out and eradicate corruption in both the public and private sectors through a comprehensive three-pronged strategy embodying investigation, prevention and education. The ICAC hunts down corruption crime through dedicated law enforcement, minimises opportunities for corruption by providing professional advice on control systems, and reduces any corrupt tendencies through a sustained and vigorous campaign of preventive education in business ethics. The ICAC would like you, as a newcomer to Hong Kong, to be aware that the Prevention of Bribery Ordinance (PBO) outlaws corruption in Hong Kong. Here is the gist of the two main provisions that any new investor must comply with: Private Sector: Section 9 of the PBO stipulates that it is an offence for any person to offer an advantage* to an agent (e.g. an employee) if the latter, when conducting the affairs of his/her principal (normally an employer), does not have his/her principal s permission. Any agent who solicits or accepts any advantage for that purpose is likewise guilty. Under Section 9(3) of the PBO, it is also an offence for an agent to use any false or erroneous documents to deceive his/her principal. Public Sector: Section 4 of the PBO stipulates that it is an offence for any person to offer an advantage to a public servant in connection with his/her official duties. Any public servant who solicits or accepts such an advantage is likewise guilty. Penalty: Seven years imprisonment and a fine of HK$500,000. The court may order the convicted employee to pay restitution to the employer. * Advantage refers to anything that is of value such as money, gift, employment, service or favour, etc., but does not include entertainment, which is defined as food or drink provided for immediate consumption on the occasion. Remarks: The law stated here and the enclosed quick-reference table are for reference only. For full details, please refer to the original text of the PBO (Laws of Hong Kong Chapter 201) on the website of the ICAC (

3 Corruption costs and doesn t pay. Here is a real case to illustrate how important it is to limit opportunities for corruption when you start a business in Hong Kong. A US firm hired an executive to source product components from Asia. It prohibited staff from accepting advantages from suppliers. The executive secretly struck a deal with a supplier who agreed to pay him an illegal kickback of 2% of total sales. He ordered the kickbacks be deposited into his designated bank accounts. A similar illicit deal was also struck with another supplier. B e t we e n a n d , t h e executive pocketed more than US$1.5 million through these illegal kickback scams. T h e s e s ca m s w e r e u n covered a n d t h e executive was charged with seven bribery offences. He pleaded guilty to two of the charges and was sentenced to one year in prison. He also agreed to repay US$3 million to his employer in an outof-court settlement. This case shows that corruption hurts a company s profits and thus dulls its competitive edge. From many such cases, the ICAC has learned that corruption increases the cost of doing business, eats into your company s bottom line and dampens the morale of ethical staff. Time, and therefore money, is also lost in recovering losses through civil claims. Most importantly, corruption ruins your company s goodwill, which is a key factor for success in today s business world. Your partner in countering corruption, the ICAC can help you avoid these hassles through our professional consultancy services which are summarised overleaf.

4 Hong Kong Ethics Development Centre (HKEDC) Your Partner in Success The ICAC believes that ethics is the first line of defence against corruption. The Hong Kong Ethics Development Centre was set up in 1995 under the ICAC s Community Relations Department to promote sound business ethics in Hong Kong. Its work is guided by the Hong Kong Ethics Development Advisory Committee (HKEDAC), on which six leading chambers of commerce in Hong Kong are represented 香 港 工 業 總 會 Federation of Hong Kong Industries 香 港 美 國 商 會 The American Chamber of Commerce in Hong Kong 香 港 中 華 總 商 會 The Chinese General Chamber of Commerce 香 港 中 華 廠 商 聯 合 會 The Chinese Manufacturers Association of Hong Kong 香 港 中 國 企 業 協 會 The Hong Kong Chinese Enterprises Association 香 港 總 商 會 The Hong Kong General Chamber of Commerce Final Signatures Artwork/ 04July2005 Over the years, the HKEDC has been providing free consultancy services to companies in four main areas: improving codes of conduct, strengthening control systems, enhancing staff competence and promoting ethical leadership. The points of the E-Compass shown on the right summarise the four main directions of our free services. If you have any queries or would like to discuss our services further, please don t hesitate to contact us. We are here to help.

5 Our tips for all new investors in Hong Kong: Your success is built on choosing the right direction. This E-Compass will be a major asset in helping you enhance the competitive edge of your business. No matter how you plan to strengthen your company s ethical culture, HKEDC is here to help. N Ethical leadership is essential in setting the right direction for your company so that it will make smooth pro gress. The HKEDC organises seminars and forums to equip entrepreneurs and their staff with knowledge and skills in ethical leadership. Our resource centre and website also offer reference materials to help you put ethics into practice. Navigating the Right Course Ethical Leadership Walking the Talk The Code of Conduct Leaders should always walk the talk (i.e., do and mean what they say) by first formulating a code of conduct which clearly spells out the company s expectations and requirements as regards its staff s acceptance of advantages and other ethical issues. HKEDC can help you formulate or review your company s code of conduct according to your business needs and aspirations. We can also advise you on enforcement tips and how to make sure that ethical practices are being carried out rather than being just words on paper. E Enhancing Staff Competence - Training In the prevention of corruption, staff integrity is the basic starting point. Enhancing their integrity and fostering an ethical culture within your company are very important. HKEDC offers lively and interactive training on the anticorruption law, corruption risk assessment, handling ethical dilemmas at work, managing staff integrity, etc., so as to enhance your staff s competence and to make your business successful. S Putting in place a good system of control will serve to minimise corruption opportunities and will expose illegal acts or malpractices at an early stage. We therefore provide tailor-made advice on strengthening companies internal systems and controls. Over the years, we have also produced a series of practical guides on corruption prevention for different trades and industries, all of which are available to you. Strengthening Control Systems Best Practices

6 Private Sector Corruption Relevant Provisions of the PBO Summary of the Law Points-to-Note for Investors HKEDC s Service Private sector employees accepting bribes Section 9(1) Any agent Without the permission of his/her principal Solicits or accepts any advantage For doing or forbearing to do any act in relation to his/her principal s affairs An employee should not solicit or accept any advantage relating to his/her work without his/her employer s permission For employees reference, investors should lay down clear guidelines on soliciting/ accepting advantages to the ICAC when they encounter a Section 9(1) offence Referring to the W of the E-Compass, we help investors to formulate/revise their codes of conduct Offering bribes to private sector employees Section 9(2) Any person Without the permission of the agent s principal Offers any advantage to any agent As an inducement to or reward for the agent s doing or forbearing to do any act in relation to his/her principal s affairs Before offering any advantage to a private sector employee, investors should make sure the recipient has the prior permission of his/her employer to receive such an advantage to the ICAC when they encounter a Section 9(2) offence Referring to the E of the E-Compass, we provide training on ethical management and the dos and don ts on doing business in Hong Kong Employees using false documents to deceive employers Section 9(3) Any agent Uses any false, erroneous or defective receipt, account or other document in respect of which his/her principal is interested With intent to deceive his/her principal It is an offence under the PBO even if the agent has not received any advantage or has not gained from using the false document to the ICAC when they encounter a Section 9(3) offence Referring to the S of the E-Compass, we advise companies on measures for tightening up internal systems to plug potential corruption loopholes Public Sector Corruption Relevant Provisions of the PBO Summary of the Law Points-to-Note for Investors HKEDC s Service Offering bribes to public servants Section 4(1) Any person In Hong Kong or elsewhere Without lawful authority or reasonable excuse Offers any advantage to any public servant (including government servants) To affect that public servant s decision to perform or abstain from performing his/her official duties Investors need not offer any advantage to public servants to the ICAC if they come across a Section 4(1) offence Investors should also report to the ICAC if a public servant solicits advantage from them Referring to the N of the E-Compass, we partner with government and business leaders in the promotion of ethical leadership and maintenance of a level playing field Quick Reference Table

7 O Brien Road O Brien Road Useful Contacts: NORTH 北 Road Tree Drive Fenwick Pier Street Murray Road Hong Kong Ethics Development Centre Address: 1/F, Tung Wah Mansion Hennessy Road, Wan Chai, Hong Kong Harcourt Road Tel: (+852) Fax: (+852) Cotton Tree Drive Queensway Fenwick Pier Street hkedc@crd.icac.org.hk Website: Gloucester Road Hennessy Road Queensway Johnston Road Opening Hours: 9 a.m. 7 p.m. (Monday to Friday) Closed on Saturdays, Sundays and Public Holidays Fenwick Street Luard Road Convention Avenue Harbour Road A2 Exit Fenwick Street Fleming Road Jaffe Road Lockhart Road Gloucester Road Luard Road Hennessy Road Johnston Road Convention Avenue Stewart Road Harbour Road A2 Exit Fleming Road NORTH 北 Jaffe Road Lockhart Road Stewart Road Mass Transit Railway Station Related Government Departments: Companies Registry (+852) Customs and Excise Department (+852) Inland Revenue Department (+852) Intellectual Property Department (+852) Invest Hong Kong (+852) Immigration Department (+852) Labour Department (+852) Trade and Industry Department (+852) Regulatory Bodies: Hong Kong Exchanges and Clearing Limited (+852) Hong Kong Monetary Authority (+852) Securities and Futures Commission (+852) Mandatory Provident Fund Schemes Authority (+852) Others: Hong Kong Productivity Council (+852) Hong Kong Trade Development Council (+852) Hong Kong Tourism Board (+852)