TRAC: TRANSPRENCY IN REPORTING OF

Presentation to the IESBA

13 January 2015
Jeff Kaye & Peter van Veen
Transparency International UK
• Jeff Kaye, FCMA, CGMA – Trustee, Transparency International
- UK

• Peter van Veen – Director, Business Integrity Programme,

Transparency International - UK
 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
 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.”

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 How Does Bribe Paying Happen?
Grand
Corruption
(Large
bribes) Facilitation
Offsets
payments

Benefits &
Perks to Gifts
Relatives

Employing
Hospitality
of Relatives
Bribery

Education &
Political
Training
donations
Projects

In-kind help
& Charitable
donations
support

Enhanced
Agents
commissions
Copyright Transparency International UK 2011
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Corruption is a Global Problem

Corruption Perception Index (CPI) 2013

What do those in business think of each other?

Bribe Payers Index 2011

Corruption links to many other ethical issues…
THE TIGHTENING NET

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Legislation and Regulation increasing

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 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

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 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

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MANAGING RISKS
 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

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 Risks
• Legal
– 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

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THE CHALLENGE OF FOR ACCOUNTANTS
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
 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…..
 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
 Ethics codes – codes within codes
Governance

Industry Industry Industry Industry

A B C D

Location

PAIBs

Other “drivers”*

* Education, training, business size, externalities, implementation, sanctions

Transparency International Resources
 www.transparency.org
www.transparency.org.uk

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EXTRA SLIDES
SOME ILLUSTRATIVE CASE STUDIES
 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?

 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?

 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.”

1. Could you give me a breakdown of your costs?

2. Yes, I've got the invoice. I'll get accounts payable to process it asap.
3. 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.

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• 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?

1. Inform your senior management or legal department about the incident

and get advice as to how to proceed.
2. Tell the distributor to leave the invoice as is to mask the problem.
3. Tell the distributor that he overstepped his mandate and must bear some
of these costs himself.

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