COVID-19 is not just a health and economic crisis. It’s a corruption crisis

“COVID-19 is not just a health and economic crisis. It’s a corruption crisis. And one that we’re currently failing to manage”, according to Transparency International. In fact, most countries in the CPI index made little progress against perceived corruption in 2020.

Over the past year, there have been global reports of bribes to obtain COVID-19 tests, bribes to receive access to healthcare and questionable public procurement. Transparency International found corruption diverts funds from essential healthcare, leaving countries less prepared to deal with a pandemic.

In both the public and private sector, COVID-19 has required fast decision-making, caused major supply chain disruption and weakened control mechanisms. All these factors have intensified corruption risk, making the case for anti-corruption reform stronger than ever.

Despite a focused effort on defeating corporate corruption, Australian businesses are being told more needs to be done or face slipping further behind their international counterparts.

The 2020 Transparency International Corruption Perception Index (CPI) was released on 29 January 2021. The index assesses and ranks the level of perceived public sector corruption in 180 countries.

Australia ranked 11 in 2020 (level with the UK), an 8-point drop from their peak score in 2012 where they were ranked 7. The trajectory has been going down since then.

Top scorers in the 2020 CPI include New Zealand equal first with Denmark and Switzerland equal third with Singapore. However, some of Australia’s neighbours and trading partners sit in the bottom half of the index, including PNG 142 and Indonesia 102.

Being in the top of the index doesn’t mean you are immune to corruption. Transparency International reports that countries at the top of the index play a major role in fuelling corrupt behaviour. In fact, in 2020, two of the largest settlements issued by the US Department of Justice for Foreign Corrupt Practices Act (FCPA) related to alleged bribes paid by companies high up the index; (France 13 and Netherlands 8) and (United States 25), to government officials in lower scoring countries (Malaysia 57 and China 78).

The private sector has an important role to play to prevent corruption

At the start of 2021, most large Australian companies have completed an Anti-Bribery and Corruption (ABC) Risk Assessment, have an ABC Policy and have performed ABC Training. However, this alone does not meet regulator expectations of a risk based, robust ABC framework, which should include:

  1. Data Driven Corruption Transaction Monitoring

There has been a shift in mature organisations from “tick the box” compliance to data driven transaction monitoring via the use of Forensic Data Analytics to gain a deeper understanding of risk and prevent and detect suspicious transactions and payments

Having a “paper programme” is not enough, regulators expect that proactive monitoring of high-risk activities, geographies and third parties is performed regularly by companies in order to assess the effectiveness of their ABC framework

  1. Robust, third party due diligence

A robust due diligence programme should consider how high risk third parties are identified and define appropriate levels of due diligence and review prior to and during their engagement.

  1. Continuous improvement

The ABC Framework should not reflect a snapshot of corruption risk at a single point in time, it should be continuously assessed, revised and strengthened to reflect;

  • Results of transaction monitoring
  • Internal changes (e.g. Changes in geographies or products)
  • External changes (e.g. the impact of COVID-19 or changes in local legislation).

Whilst the recent Corruption Index ranking for Australia is disappointing, there are several initiatives in 2021 which should improve Australia’s future ranking:

  • The Australian Bribery Prevention Network launched in 2020, and is a public-private partnership that brings together business, civil society, academia and government with the shared goal of supporting Australian business to prevent, detect and address bribery and corruption and promote a culture of compliance.
  • The Combatting Corporate Crime Bill was reintroduced to parliament in 2019 and should be debated in the coming months. Read more about the proposed changes here.
  • The introduction of a Commonwealth Integrity Commission (CIC). The primary function of the CIC would be the investigation of serious criminal conduct that represents corruption in the public sector. The draft legislation is currently accepting submissions and should be finalised this year.
  • The formation of the Commonwealth Fraud Prevention Centre (established mid-2019) has seen an increased focus on public sector awareness and training related to fraud, corruption and conflicts of interest, increasing capability within public departments.
  • The Australian Government passed the anti-money laundering reforms known as Phase 1.5 in December 2020 as part of the Anti-Money Laundering and Counter-Terrorism Financing and Other Legislation Amendment Act 2020. The changes support cooperation and information sharing to detect, deter and disrupt money laundering, and other serious crimes, including corruption. The timetable for “Tranche 2”, extending the AML/CTF laws to lawyers, accountants and real estate agents, remains under consideration.

With many public and private anti-corruption initiatives in progress in 2021, we hope successful reform will be enough to reverse Australia’s downward trend.

Share

Add a comment