GUEST BLOGGER
Raina Verma, CFE
Manager, Financial Crimes, National Bank of Fujairah

Early in my career, I was exposed to various potential conflict-of-interest situations and was tasked with raising awareness and providing training to employees. I realized hypothetical conflict-of-interest scenarios, when presented to employees, assist in the thinking process and elicit new ideas. Each time we discussed the hypothetical scenario, it brought about a new dimension. Here’s a hypothetical conflict of interest, deconstructed to different levels of thinking.

Start with the employee’s view of the potential conflict

Let’s say I am the employee, and my brother-in-law’s company, Company A, supplies stationary to the organization where I work. My organization defines family as a spouse, parent or sibling. I’m not close with my brother-in-law and don’t think of him as a sibling, so I don’t think I need to declare this conflict. To me, it is not a conflict. I have nothing to do with his business. My name is not listed on his company documents. We are socially active, yes, but I interact with him like I would interact with a casual friend. Besides, his line of work doesn’t compete with my organization.

Now, let’s examine the facts

Company A has recently been shortlisted to supply stationary to the organization.
Despite being shortlisted, it is established that Company A is facing issues in relation to the quality of material supplied to other entities in the market.
Company A supplies items that do not meet the quality requirements. Due to the inconsistency in the quality and inability to meet the contractual agreement, the organization decides to return the items received, retrieve the paid amounts and terminate the contract with Company A.
In order to retrieve the funds and cancel the contract, the matter is handed over to the remedial team responsible for vendor management. The remedial team is unable to establish contact with the owner of the Company A.
Due to the large amounts involved, further investigation is requested on the case.
It comes to light through social media platforms that Company A has a related party employed with the organization.

Let’s pause here and think about the employer’s perspective

Ordinarily a conflict of interest policy set out by employer requires employees to disclose any potential conflict-of-interest situations whether or not employee is in a conflict-of-interest situation. It’s about the perception of conflict. Also, the policy in relation to conflicts of interest stipulates that the employee is not to deliberate if a potential situation is a conflict or not. Employees are expected to declare the potential situation and work with the employer to arrive at amicable outcomes. The policy expects the employee to adhere in essence and not just wording. Employees have the legal and ethical obligations to declare to the employer if the employee represents a business or if their employer has ties with business whereby the employee is a related party. Further, the responsibility to provide the employee with a solution rests with the employer.

The policy should make the employees reflect on a few aspects, such as:

When it comes to conflicts of interest, perception is reality.
There is a probable expectation that the employee will disclose a potential conflict of interest situation as it surfaces.
Employees are required to make a decision about what constitutes a potential conflict of interest.

Here’s what the remedial team uncovers

I, the employee, may have influenced the decision-making stage, leading to the potential outcome of the contract being awarded to Company A, where my brother-in-law is the Ultimate Beneficiary Owner (UBO).
Although the UBO is unreachable, social media platforms confirm a photo published with me and my brother-in-law three weeks ago.
An audit trail of my organization’s interactions with Company A show me, the employee in question, accessing related data.

What happens next?

At this stage, a review team will need to look at various recovery strategies, and there are many aspects that complicate my position. I may not be able to come out clean. First of all, I will be asked by my organization to assist in the recovery and provide contact details and whereabouts of Company A’s UBO. Here are a sample of the types of questions my organization will now need to answer:

How will I be viewed by my organization? Am I trustworthy?
Are there more companies where my brother-in-law, or another family member, is a potential partner, owner or authorised signatory?
Did I use my powers in a professional capacity to favor my brother-in-law?
Did I put myself in a position to ask for permission at the beginning of the organization’s relationship with Company A to now request for forgiveness?
Can aspects of bribery and corruption come into play?
What are the regulatory impacts or guidance in such matters?

The expectation of a conflict-of-interest policy is for employees to always share a potential conflict situation with their employer. At the same time, the expectation from the employer is to provide the much-required guidance and support on the matter. Transparency is a two-way street. Now ask yourself this question. If you were the hypothetical employee, how would you have handled this situation differently?

The views expressed in this article are the author’s own.

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