“The time for forgiveness is over.” One of the panellists at yesterday’s international Anti-Corruption Summit in London echoed what many who have dealt with, and been frustrated by, corruption have been thinking for a long time. Matt Hancock, a minister for the UK Government’s Cabinet Office, took a more diplomatic, but no less realistic, position: “Corruption is made by man and it is within man’s gift to end it.” Wherever you sit on the spectrum, most businesses agree that they would really rather do without corruption. It creates inefficiencies, costs money and market share and causes unpredictability, all of which go against business fundamentals. Indeed, the UK Secretary of State for International Development, Justine Greening, referenced one of the findings of Control Risks’ survey, International business attitudes to corruption 2016 to bolster her case: “34% of respondents from Africa reported losing out on deals to corrupt competitors. That’s why having a level playing field is so important. So governments will play their part but the onus is also on businesses themselves to take action on transparency.”
So what are the headline issues that responsible businesses need to address around corruption after this summit? In a nod to the role of technology in promoting transparency, the plenary sessions of the summit were live-streamed. But if you missed the debate, here are our five takeaways:
- The summit successfully co-opted many of the leaders who matter in this debate in a “coalition of the committed”. Nigeria’s President Muhammadu Buhari, who came to power on an anti-graft mandate, was the first to unequivocally endorse the summit communiqué and made a clear commitment for Nigeria to implement the Open Contracting Data Standard for transparency in public contracting. Afghanistan’s President Ashraf Ghani also pointed to his direct involvement in overseeing good procurement practice in his country which includes sitting in weekly procurement committee meetings, but he emphasized that states need to put practical measures in place rather than just apply political pressure behind anti-corruption initiatives. The Nigerian President was definite that one of his priorities will be to secure the restoration of ‘stolen’ public assets to Nigeria from offshore and overseas, but that process is unlikely to be effective without a strong governance framework to audit the flow of funds. The private sector should pay attention to those markets most likely to demonstrate a commitment to improved governance in the coming months and years, and look for opportunities to support the process, where appropriate.
- Enablers was the term of the day, but there are two sides to corruption. ‘Upstream’, corruption occurs when bribes are paid, embezzlement occurs, fraud is committed by public officials, very often with the help and connivance of third parties. ‘Downstream’, the proceeds of corruption, much of which should have made their way to the public purse, are channelled through corporate fronts, shell companies and sometimes into non-transparent offshore jurisdictions. From there it finds its way in to developed property markets, luxury car showrooms and lavish nightclubs, again often with the help of trusted middlemen. The summit put more emphasis on downstream enablers. But tax havens and offshore jurisdictions will continue to multiply in the short term, and at the root of corrupt capital outflows is an enabling environment that allows and in some cases encourages bribery. The emphasis placed on downstream concerns will undoubtedly change behaviours in the private sector (especially when the mooted “tax inspectors without borders” come to call), but these changes need to be complemented with concerted efforts to support governance improvements in the markets that need it most.
- The summit could propel the development of new disclosure and criminal standards. UK Prime Minister David Cameron used the platform to reiterate two initiatives which he hopes will become global benchmarks: the introduction of a new criminal offence of failing to prevent tax evasion, and the UK’s beneficial ownership register. Criminalizing the failure to prevent tax evasion is likely to be modelled on one of the more stringent provisions of the UK Bribery Act (s. 7, failure to prevent bribery) which many businesses can attest requires a significant time and resource commitment to satisfy. The UK is about to launch its free public register of companies’ beneficial owners, as will the EU in June of this year. The concept has taken hold although the matter of cross-border sharing of registers is still hotly debated. And these registers are far from perfect: the threshold for inclusion on the UK register at 25% ownership is still very much high enough to hide behind and a pilot scheme by the Extractives Industry Transparency Initiatives has shown that obtaining reliable information is challenging, to say the least. We expect a sharp increase in activity connected to cases brought under the UK Bribery Act in the short term, to be welcomed some five years after the Act was passed – perhaps this is an indication that the private sector should expect these new initiatives to have an impact soon, but not immediately.
- Technology has revolutionized corporate transparency, and the scale of information we can harness as citizens, governments and corporates. We have yet to feel the full blast radius of the Panama Papers leak which is feeding a growing public awareness about the misuse of offshore jurisdictions as a shelter for siphoned public funds and proceeds of crime. Technology will also be increasingly used to improve accountability: digital and satellite photography have been used to track the implementation and progress of development projects. And technology will drive efficiencies: the president of the World Bank pointed to the successful roll-out of biometric smart cards in India to disburse public payments as a means to curb low-level bribery, and it instructive to see the extent to which civil society has embraced technology – not only the hardware and the software, but the innovative networks and collaboration that it enables. Front-footed private sector actors are engaging with this technology, and it will be interesting to see what more it can be used for in this regard in the areas of collective action, employee engagement and accountability, for example.
- The private sector will be held to account, and the floor is open. Firm statements were argued for government accountability: transparent governance is the best way to attract good companies to difficult places. The private sector has all of the answers to public sector corruption and most businesses do this admirably through sound procurement, fraud risk management, tight supply chains, etc. Companies will miss an opportunity to engage with these challenging but attractive markets if they fail to act collectively to front-foot the debate on their role in managing and mitigating corruption risks.
Underwriting all of these points is the fact that the Summit has reinforced the concept that many of the world’s most pressing challenges are underwritten by corruption: insecurity, poverty, poor healthcare, failing education, ineffective rule of law, organized crime, modern slavery, extremism. This emerging global consensus may be at a tipping point and we would argue that the private sector has the potential to play a decisive role in pushing the anti-corruption movement over that point. For businesses looking to shape their contribution to the world, there may never have been a more compelling or coherent opportunity to do so.