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Avoiding Corruption - Transparency International UK and IBE

Transparency International UK and IBE adopt Day 20 of Ethics Month

The UK Bribery Act: is Compliance Sufficient?

By Peter van Veen

The UK Bribery Act 2010 (UKBA) is globally seen as one of the strongest pieces of legislation of its kind. It has led to a whole compliance industry since its introduction in July 2011 as companies scrambled to get their house in order.

The main driver behind this spate of activity was a new corporate offence of failure to prevent bribery. The Ministry of Justice outlined 6 key steps that companies needed to have in place to be able to demonstrate they had "Adequate Procedures.”

It is worth noting, as a result of this requirement, that over the last 5 years corporate anti-corruption standards have increased considerably. Most UK based companies or those with operations in the UK (i.e. those within the remit of the UKBA) have made substantial investments into assessing the risks that bribery pose and put policies and procedures in place to mitigate those risks. They have communicated and trained staff and business partners on the policies. They will also have invested in due diligence on 3rd parties to minimise the risk of those third parties acting as rogue elements in their supply chain.

Many have hired law, accounting and other specialist firms to poor over their anti-bribery systems, or have hired specialist risk consultancies to help map risks in their supply chain. Others will look to benchmark their systems to make sure they indeed have the "gold plated” systems their advisers may have promised them or against their peers as part of a continual improvement process (such as our own benchmarking programme).

This month sees the launch of the new ISO anti-corruption standard: ISO37001. It is a way for companies to gain a kite mark to show they have all the right things in place. A useful investment to show your stakeholders that you have the basics in place. There are also advisory firms who certify companies and their anti-corruption systems.

So that is it then. Invest in compliance systems, get benchmarked, get yourself certified and you no longer need to worry.

Alas, this could not be further from the truth. Any company can effectively buy a compliance programme off the shelf from its advisors and then have it certified.

Certificates tell you exactly nothing about the company’s culture, its risk appetite, where it operates or whether it is likely to put profit before ethics.

It is no coincidence that the first step in the Ministry of Justice’s Adequate Procedures is "tone from the top” – i.e. a culture that does not tolerate bribery. Without this the compliance programme is likely to be fatally flawed.

In early September, Wells Fargo agreed to pay US$185 million in settlements to US regulators over admissions that, in order to meet sales targets, employees of the bank had created and operated around two million fictitious customer accounts and credit card applications since 2011. About 5,300 employees were fired for their involvement in the scheme.

Analysis of the allegations indicates that Wells Fargo was not lacking in "tone at the top” or ethics and compliance training – in fact, it appears employees were explicitly told not to open fraudulent accounts to meet targets – but that this messaging was overridden by pressure to cross-sell from regional managers whose bonuses were at stake.

So, five years on from the introduction of the UK Bribery Act it is still important to ensure your company has adequate procedures and that you continue to raise the bar. But the key remains to ensure your company’s culture promotes doing business with integrity, encourages the right behaviour, discourages the wrong behaviour and rewards those that speak up about breaches to the company’s code of conduct.

Only by aligning it with a strong culture will your company’s anti-corruption efforts be truly "adequate”.

NB: With help from the IBE’s Simon Webley, we recently published a guide on the role incentives have in encouraging the right culture (as opposed to what seems to have been the case at Wells Fargo) .


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