1. Presentation to the IESBA
13 January 2015
Jeff Kaye & Peter van Veen
Transparency International UK

2. Jeff Kaye, FCMA, CGMA – Trustee, Transparency International - UK
Peter van Veen – Director, Business Integrity Programme, Transparency International - UK

3. Transparency International
Founded in 1993
Chapters in over 100 countries
Specialist anti-corruption NGO
Transparency International’s Approach:
Zero tolerance
Corruption has victims
Any bribery embeds corruption in the system
Fighting corruption often requires collective action to achieve systemic change

4. Corruption and Bribery
What is corruption? “The abuse of entrusted power for private gain” What is bribery? “The offering, promising, giving, accepting or soliciting of an advantage as an inducement for an action which is illegal, unethical or a breach of trust.”

5. How Does Bribe Paying Happen?
Bribery
Grand Corruption
(Large bribes)
Facilitation
payments
Gifts
Hospitality
Political donations
Charitable donations
Agents
Enhanced
commissions
In-kind help &
support
Education & Training Projects
Employing of Relatives
Benefits & Perks to Relatives
Offsets
Firstly, a bribe doesn't have to be about money in a brown envelope. It is anything at all that might be of value to the person you are bribing.  
The thing of value can be disguised as a gift or hospitality, or it can be a payment to an intermediary - these are two red-flag areas for bribery, as you will see later in this module.
'Improper performance' is a breach of a person's proper role or function. It may involve actions, such as an award of a contract or a permit, or it may simply involve inaction, i.e. someone turning a blind eye to something they are supposed to do.
In the UK and many other jurisdictions, the legislation now applies this definition in the widest possible sense. For instance, a UK company can be prosecuted for paying bribes anywhere in the world.
Copyright Transparency International UK 2011 5

6. Corruption is a Global Problem
Corruption Perception Index (CPI) 2013

9. What do those in business think of each other?
Bribe Payers Index 2011

11. Corruption links to many other ethical issues…

12. The tightening net

13. Legislation and Regulation increasing

14. UNCAC Anti-corruption Laws
Signatories encouraged to criminalise:
Passive bribery of all public officials
Illicit enrichment
Abuse of function
Trading in influence
Private sector bribery and embezzlement
Money laundering and concealment of assets
Whistleblower reporting and protection measures
[OPTIONAL]
See Reference document R1 for explanations of terminology.
These are the practices encourage, but not required, to make criminal offences.
Passive bribery (demand side/receiving the bribe) includes: denial of goods or services, access to utilities, access to licences, legal sanctions and lost opportunities.
UNCAC also addressed whistleblower protection:
Article 8: Codes of Conduct for public officials to facilitate the reporting by public officials of acts of corruption to appropriate authorities
Article 13: Reporting channels - take appropriate measures to ensure that the relevant anti-corruption bodies are known to the public and provide access for the reporting, including anonymously, of any incidents.
Article 33: Protection of reporting persons against any unjustified treatment for any person who reports in good faith.

15. Common features of anti-bribery laws
They seek to punish bribe givers and takers
Extra-territoriality
Criminal offence
Foreign public officials
Penalties for individuals and organisations
Corporate liability
As new bribery laws get drafted and old ones are updated, a set of common themes is emerging. These are based on what the OECD considers a good anti-bribery law to be, the key principles in UNCAC and the FCPA.
Punish bribe givers and takers – hence reference to both active and passive bribery in UNCAC.
Extra-territoriality - If you were to get involved in bribery, you could be prosecuted in a jurisdiction other than your home country for bribes paid anywhere in the world, eg in the US.
Criminal offence - international pressure has strongly increased to make bribery a criminal offence and to encourage prosecution of offenders. Previously a civil offence.
Foreign public officials - most laws make a special reference to bribes paid to overseas public officials as transactions involving such public officials are regarded as high-risk. But bribery in the private sector is increasing and recent anti-bribery laws reflect this. Included in this category are: Civil servants, local government officials. government ministers, health officials, judges, MPs.
Penalties for individuals and organisation - range from heavy fines to imprisonment and even the death sentence
Corporate liability – companies are increasingly being held liable for bribes paid by their employees and agents – and the fines and associated costs are growing.
Duress or extortion – if the payment is genuinely the result of a threat to the person’s security, it is unlikely to be deemed as bribery.
PAUSE FOR DISCUSSION
Pause here to check in and allow learners a break from the slides.
Ask the group to share any thoughts on what we have shared so far before we take a look at the UK Bribery Act. For example, are there any surprises? How does this impact on their work, eg extra-territoriality rules, penalties for individuals.
Allow 3-4 minutes discussion then move on to look at the UK Act.

16. Managing Risks

17. Adequate Procedures High-level commitment Risk assessment
Policies and Procedures
Implementation (e.g. training, communication)
Due diligence assessment of partners, agents and contractors
Monitoring and evaluation
We can respond in a positive way – by adopting zero-tolerance as a starting point. This leaves no room for doubt. Needs to be communicated effectively. In real life, it will still happen. But less likely if you commit to ZT.
Introduce the 7 principles (refer to WB11):
Commitment – tone needs to permeate all levels
Risk assessment – do this regularly as the risks vary over time, where you operate, sectors etc
Procedures – purposefully designed to suit the risks facing your organisation, as highlighted by the risk assessment
Due diligence of 3rd parties - agents, procurement, local partners. Need contracts and certification. We don’t have control over their processes but have to make it clear what you expect – they must operate to the same standards.
Communication - employees need to know what to expect so train what it means for ZT, the situations they will face and how to deal with them. Provide support and guidance.
Monitoring – check that your policies are working, then learn and adapt if needed.
Collective action – this is about working externally and we will address that this afternoon.
Reference: the BOND/TIUK/mango Principles document.
Next, CAROUSEL ACTIVITY, SEE FN4.

18. Risks Legal Organisational Reputational Prosecution
Fines and imprisonment
Large legal and compliance costs.
Organisational
Loss of focus – takes up management time
Huge internal disruption
Reputational
Brand reputation damage
Loss of Key Customers
Loss of staff + decrease in morale

19. The Challenge of for accountants

20. Inducements: when does a gift become a liability?
Gifts and hospitality are common in many parts of the world in business
Reciprocity is often (but not always) expected
In some cultures, the size of the gift is directly correlated to the perceived importance of the business relationship
Refusing gifts in many cultural contexts can be fatal for the business relationship
Different cultures/ industries have different expectations and traditions in terms of size of gifts and hospitality
Some companies ban the receipt and giving of gifts

21. The Role of Accountants relating to Corruption
Uncover & Report Corruption/ Whistleblower
Unwitting participant in corruption
Hoodwinked
Negligence
Witting participant in corruption
Willful Blindness
Connivance
Willing participant in corruption
Collusion
Instigator
Illegal vs unethical…..

22. What can Accountants do?
Be familiar with the law
Do not participate in Bribery
Understand where the risk of bribery/ corruption is in their organisation/ industry/ country
Understand the impact of a bribery incident to their organisation
Know what to look for in relation to Bribery
Ensure proper policies and procedures
Create an environment where they are comfortable to ask questions and push back
Be comfortable raising/ reporting concerns to senior management / compliance function or externally if need be

23. Ethics codes – codes within codes
Governance
Industry A
Industry B
Industry C
Industry D
Location
PAIBs
Other “drivers”*
* Education, training, business size, externalities, implementation, sanctions

24. Transparency International Resources

26. Extra slides

27. Some illustrative case studies

28. Case Study 1
You are in the process of issuing a tender for a new IT System. This is a significant project running into several hundred thousand Euros.
Bill works for Datax who have done IT work for you over the last few years and you have got to know him very well often meeting for lunch and occasionally playing golf or tennis on the weekend. You consider him a good friend – certainly more a friend than than a supplier –as his last project finished over 9 months ago.
You are due to meet Bill for lunch for a regular catch up and a chance to chat about your mutual interest: mountaineering.
Bill has just called you that he understands that there may be a tender coming up and that this is excellent news. In fact his boss has told him it is OK to put the lunch on expenses and go somewhere a lot nicer than the café you were planning.
Bill jokingly finishes off: “of course we can get the business end done quickly and focus on talking about the real business of our plan to climb K2 !”
What do you do?

29. Case Study 2
After a well deserved Christmas break you come back to the office to find 5 boxes on you desk. When you open them up you find the following:
A bottle of vintage champagne from a consultant to celebrate the completion of a major assignment
A Swarovski crystal plaque from one of your clients with an inscription celebrating 10 years of working together
A couple of good bottles of Bordeaux wine from a supplier
A small gold looking statue of an Eagle as a thank you from a delegation from the Gulf that visited you the previous year on behalf of Brunel Energy
A couple of tickets to a musical from a stagiaire thanking you for the opportunity to gain experience
What do you do with these gifts? Do you accept them?

30. Case Study 3
Some months ago you asked a distributor for a neighbouring country that you oversee to show a key customer, travelling in that country, around over a weekend. After a long delay, he's finally submitted an invoice for the expense. It is for 6,000 dollars and the transaction is described as "recharge of Distributor's sales promotion expenses". No further details are given. He's calling to chase it up. How would you respond to him?
Olaf: "Hi, did you get my invoice? Could you get it paid soon? We've been out of pocket for many months.”
Could you give me a breakdown of your costs?
Yes, I've got the invoice. I'll get accounts payable to process it asap.
Certainly, I'll get it paid today. You did well. We've done some more business with that customer. I'll keep you in mind if something like this comes up again.
This is a large cost just for showing a person around and may look like a bribe. So, at a minimum, you must ask for details of expenditure in case you are asked.

31. Tell the distributor to leave the invoice as is to mask the problem.
Olaf: "Sure. I can resubmit the invoice with a detailed breakdown and payment receipts. I know the cost is high, but I thought you wanted me to take good care of him. I took him out to the most expensive restaurant and bought some pearls for his partner."
The distributor is recounting items that include rather lavish entertainment and gifts. What would you do now?
Inform your senior management or legal department about the incident and get advice as to how to proceed.
Tell the distributor to leave the invoice as is to mask the problem.
Tell the distributor that he overstepped his mandate and must bear some of these costs himself.
If you detect problems with costs (e.g. cash payments, lavish entertaining, unusual hotel bookings, large gifts), you should report them internally through the correct channels – such as your legal or compliance department. Remedies may include asking the customer for reimbursement and instructing, controlling and monitoring intermediaries more carefully in the future. This may include putting in place processes for pre-approval of certain expenses.