Deals under the Table – the Doing or Undoing of Business?

Hong Kong, December 16, 2009

Regulators and Professionals: Guarding Whose Interests?

Regulators and Professionals, what does business expect, what does it fear, how can they cooperate?

Intervention by François Vincke, International Chamber of Commerce (ICC)

1.- A three pronged trip• Doha (5-8/11): Fifth UN Global Compact

Working Group on the Tenth Principle and the Sixth Global Forum on Fighting Corruption and Safeguarding Integrity

• Dubai (20-22/11): Global Agenda Council of the World Economic Forum

• Hong Kong (15-17/12): 4th ICAC Symposium

2.- Taking stock2009, a year during which bribery has become

more then ever a challenge and a threatWhat is the effect of the crisis: more or less

compliance, more or less enforcement?UNCAC has an implementation review

mechanism, how will it be used?OECD will issue a new 2009 Recommendation,

resulting from the review of its legal instrumentsLisbon Treaty enters into force (art.69 B,

corruption “particularly serious crime with a cross-border dimension”)

OLAF and GRECO celebrate their tenth anniversary, how are they planning their future?

3.- ICC and anti-corruption ICC, the “world business organization”, has since

1977 taken a strong position on corruption and renewed its efforts as from 1995

Extortion and bribery, in all their forms, are unequivocally condemned

Companies are encouraged to have strong willed self regulation and to install robust, full fledged and sustainable integrity programs

Willingness to engage the authorities (international organizations, national legislators, regulators and professions) in public/private partnerships with the view to creating a culture of integrity

4.- Our place in anti-corruption? as a direct actor : the corrupting party in public and

private corruption

as a direct victim : the solicited or extorted party

as an indirect victim : the losing and not compensated competitor

as an indirect actor : through corrupt members of staff (private corruption)

as a tax payer : through higher taxes caused by a corruption induced increase in public spending

as a disenchanted investor in front of all pervading corruption

5.- What are our goals? The famous level playing field:

freedom of enterprise and investment not hampered by difference in ethical standards

no CEO should have the feeling that he/she is the only one to apply high ethical standards, while his/her competitors are cheating

all anti-corruption provisions to be equally interpreted/ implemented/enforced and applied everywhere

integrity is rewarded and infringement is sanctionedFor our well understood self–interest, we want

business integrityPricewaterhouseCoopers, Fifth Global Economic Survey,

Economic crime in a downturn, November 2009: Companies with both ethical guidelines and compliance

programs suffer fewer economic crimesCompliance is a good investment

6.- What are the instruments? 1. Precise and realistic conventions2. Clear national implementing laws

1. Clear mandatory provisions (criminalization provisions)2. Leaving space for corporate self regulation (co-

regulation)1. Selection, appointing and remunerating intermediaries2. Facilitation payments3. Gifts and hospitality4. Political contributions5. Charitable donations…

3. Strong national regulators 4. Robust corporate integrity programs

7.- Necessary cooperationFighting corruption is a daunting task, requiring all

energies November 2009 PwC Economic Crime Survey:

30 % have experienced at least one incident of fraud in the past 12 months

40 % say risk of economic crime had risen due to recession ICC and ifo World Economic Survey, August 2009

What will be the impact of the global recession on businesses’ efforts to comply with anti- corruption measures? Most of the countries: minimal impact In some countries : reinforcement But also in other countries : relaxation

Corporate compliance requires lots of synergies between business, regulators and professionals Example of money laundering

8.- Regulators & Business (I) The scene is set by article 12 UNCACRegulators and business should cooperate on

preventive measures: A.- Define the minimum preventive measures businesses

should take in order not to be considered negligent US DoJ Sentencing Guidelines Italian Legislative Decree n° 231 of June 8, 2001

Bribery Bill (UK) of March 25, 2009 (offence of negligently failing by commercial organizations to prevent bribery)

Financial Services Authority (FSA) fined AON UK subsidiary on January 6, 2009 for having taken insufficient measures to ensure compliance with its code of conduct

Can we think of European/UN Sentencing Guidelines?

9.- Regulators and Business (II) B.- Should businesses go for voluntary disclosure?

Article 12, §2, (a), UNCAC recommends cooperation between law enforcement agencies and relevant private entities

US practice and the UK SFO is open to self reporting (Guide of July 21, 2009)

Business on the European Continent is not used to such kind of cooperation

But voluntary disclosure may lead to acceleration of the process civil rather than criminal proceedings leniency

European business sees the advantages of cooperation but considers that criminal procedural legislation are not designed for voluntary disclosure

10.- Regulators and Business (III)Regulators and business should cooperate on

defining standardsbusiness organizations in contact with

international organizations to define more precisely standards on facilitation payments (evolution in ICC) whistle blowing (directive/laws on data protection and

anonymous reporting; recommendations by Group 29; differentiation of worldwide whistle blowing systems)

political contributions (work done by Council of Europe and GRECO)

draft OECD document on lobbying

11.- Professionals and Business: Auditors (I)There is no real integrity program without provisions

on internal and external audit What can business expect from the auditing

professionals in relation with corruption prevention/detection? In June 2008, the OECD Working Group on corruption

conducted a Review of the OECD anti-corruption instruments and asked different stakeholders their comments

The auditing profession stressed that Their primary purpose is to give an opinion as to whether the

financial statements give a fair view and are free from material misstatements

An external audit is not planned or carried out with a view to ensuring that all acts of bribery are uncovered nor in an assurance being given that there are no such acts of bribery that remains undetected. Only forensic audit specifically designed with bribery detection in mind, could hope to achieve such objectives.

12.- Professionals & Business: Auditors (II) Auditors indicate clearly the limits of their

responsibility: the maintenance of company’s books and records is the sole

responsibility of the management of the company the responsibility for the prevention and detection of non-

compliance rests with management it is the role of management to communicate non-compliance

to appropriate third parties, unless the auditor is required by law to communicate directly with such parties

Auditors have a duty of confidentiality Is there a need for (the US concept) of “safe harbor”? Is there a possibility to find a new balance in the

division of responsibilities?

13.- Professionals & Business: Legal Profession (I) Growth of the Ethics and Compliance

Officers professionNo integrity program is conceivable without

one (or more) ethics or compliance officer(s)an ethics committee (European continent)

A Chief Compliance Officer (CCO) reports to the Board, the Audit Committee (or the Chairman thereof), not - as far as I know - to the General Counsel

14.- Professionals & Business: Legal Profession (II)The ethics/compliance and legal professions

have parallel (and not necessarily overlapping) evolutions

Ethics and compliance officers are required to be persons with practical knowledge of the businesshaving sufficient independence of mind to inspire

an integrity culture but they don’t have to be lawyers

Legal profession has certain reporting obligations in relation with money laundering, what about (large scale) corruption?

15.- Conclusions• Corruption needs more than one actor to be

committed and many more than one actor to be fought against

• The legal instruments are ready• What we now need is day to day implementation• Practical public-private partnerships,

embedded in the economic reality , can make a difference

• Business has shown – for instance with the CEO letter pleading for an implementation mechanism for UNCAC – that it stands ready for cooperation and even initiative in anti-corruption