Compliance Blog

Credit union bribery is illegal. 

Perhaps this is news to no one, but I was reminded of this recently when asked by a NAFCU-member whether a credit union employee could accept a monetary gift of thanks from a member.  While gifts of appreciation and other gratuities from members to credit union employees are, in most cases, innocent and well-intentioned, an employee's receipt of such gifts can raise bribery concerns.

 Code of Conduct

NCUA has an old, but still effective, Interpretive Ruling and Policy Statement (IRPS) from 1987 (See, IRPS 87-1) that provides guidance to federally insured credit unions with respect to the Bank Bribery Act. See, 18 U.S.C. §215.  Among other things, IRPS 87-1 "encourages federally-insured credit unions to adopt codes of conduct that describe the prohibitions of the bank bribery law" and recommends procedures to ensure compliance with the law.

By way of brief background, the Bank Bribery Act generally prohibits a credit union "officer, director, employee, agent, or attorney " from seeking or accepting anything of value, with the corrupt intent to be influenced or rewarded in connection with any business or transaction of the credit union. The law also prohibits anyone from offering or giving anything of value to a credit union officer, director, employee, agent, or attorney in connection with any business or transaction of the credit union, with the intent to corruptly influence or reward that person.

Specifically, the law states:

"(a)  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

(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 fined not more than $1,000,000 or three times the value of the thing given, offered, promised, solicited, demanded, accepted, or agreed to be accepted, whichever is greater, or imprisoned not more than 30 years, or both, but if the value of the thing given, offered, promised, solicited, demanded, accepted, or agreed to be accepted does not exceed $1,000, shall be fined under this title or imprisoned not more than one year, or both." See, 18 U.S.C. §215(a). 

It is important to remember this prohibition on credit union employee gifts, because the penalties are criminal, not to mention pretty severe:

• If the value of the item or benefit offered or given to the credit union employee is greater than $1,000 in value, the offense is a felony punishable by up to 30 years imprisonment and/or a fine of up to $1,000,000 or three times the value of the bribe or gratuity, whichever is greater.
• If the thing of value is $1,000 or less, the offense is a misdemeanor punishable by imprisonment of up to one year and/or a similar fine. See, 18 U.S.C. §215(a).

Exceptions

There are some exceptions to this general prohibition, to allow credit union employees and officials to accept reasonable gifts and entertainment under certain circumstances. IRPS 87-1 states:

"In its code of conduct, the credit union may, however, specify appropriate exceptions to the general prohibition of accepting something of value in connection with credit union business. There are a number of instances where a Credit Union Official, without risk of corruption or breach of trust, may accept something of value from one doing or seeking to do business with the credit union. 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 public under the same conditions on which it is available to the Credit Union Official; or if the benefit would be paid for by the credit union as a reasonable business expense if not paid for by another party. By adopting a code of conduct with appropriate allowances for such circumstances, a credit union recognizes that acceptance of certain benefits by its Credit Union Officials does not amount to a corrupting influence on the credit union's transactions." See, IRPS 87-1 (Emphasis added). 

Examples of acceptable gifts and benefits that a credit union may incorporate into its code of conduct include the following:

• Gifts, gratuities, amenities, or favors based on obvious family or personal relationship where the relationship is the motivating factor for the gift.
• Meals, refreshments or entertainment of reasonable value and in the course of a business meeting.
• Loans on customary terms to finance proper and usual activities.
• Advertising or promotional material of reasonable value (e.g., pens, pencils, note pads, key chains, etc.).
• Discounts or rebates on merchandise or services that do not exceed those available to others.
• Gifts of reasonable value that are related to recognized events or occasions (e.g., a promotion, wedding, Christmas, etc.).
• Civic, charitable, educational, or religious organizational awards of recognition.
• Other gifts, on a case-by-case basis, if approved by the credit union.

NCUA does not define what is "reasonable" in value because "what is reasonable in one part of the country may appear lavish in another part of the country."  However, a credit union may establish an acceptable range of dollar values or specific dollar limits on excepted gifts.  

Disclosure

Additionally, a credit union's code of conduct should provide that if a credit union employee or official is offered a gift in excess of what is acceptable under the credit union's code of conduct, the employee or official must disclose that fact to the credit union.  Keep in mind, however, that while such disclosure evidences good faith, the prohibitions of the bank bribery statute are not mitigated merely by the disclosure:

"The code of conduct should provide that, if a Credit Union Official is offered or receives something of value beyond what is authorized in the credit union's code of conduct or written policy, the Credit Union Official must disclose that fact to an appropriately designated official of the credit union. The credit union should keep written reports of such disclosures. An effective reporting and review mechanism should prevent situations that might otherwise lead to implications of corrupt intent or breach of trust and should enable the credit union to better protect itself from self-dealing. However, a Credit Union official's full disclosure evidences good faith when such disclosure is made in the context of properly exercised supervision and control. Management should review the disclosures and determine that what is accepted is reasonable and does not pose a threat to the integrity of the credit union. Thus, the prohibitions of the bank bribery statute cannot be avoided by simply reporting to management the acceptance of various gifts." See, IRPS 87-1 (Emphasis added).

While criminal credit union bribery is likely a rare occurrence, it is always a good idea to periodically review credit union codes of conduct and to remind employees and officials of the restrictions on certain gifts from members.

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