Norms and Certifications: How Companies and Organisations Can Tackle Corruption
Corruption scandals have become a modern scourge. In the age of digital banking and global commercial entities, there is ever more space for graft to creep into and fester within the mechanisms of business. The World Economic Forum puts the cost of this endemic corruption in the region of $1.5 trillion, or 2 percent of global GDP (Gross Domestic Product).
According to a report by Transparency International, two-thirds of the countries surveyed in 2017 are either “corrupt” or “highly corrupt”. Worse still, the report states that “the majority of countries are making little or no progress”. So, what can be done to improve the dire situation around the world? Many believe that the way forward is through internationally recognised anti-bribery certification.
The 15th of January 2015 saw the start of arrests in Brazil related to one of the biggest corporate corruption cases in history. What started out as a money laundering investigation, later went on to expose an unparalleled network of sophisticated illicit payments in a sting dubbed “Operation Car Wash”. The scandal involved politicians, public officials, law enforcement, a semi-public oil company, and a now infamous contractor.
Central to the incident was the company Odebrecht, a Brazilian construction, engineering, and petrochemicals conglomerate. Authorities arrested the CEO, Marcello Odebrecht, over an extensive list of charges relating to bribe payments to the petrochemical company, Petrobas, in exchange for contracts and illegal favours. The US authorities stated that for more than a decade, Odebrecht paid $788m (£627m) in bribes to government officials and to political parties in several countries in order to win business opportunities.
“The criminal conduct was directed by the highest levels of the company, with the bribes paid through a complex network of shell companies, off-book transactions and off-shore bank accounts,” the US Department of Justice said.
The full episode embroiled a huge number of public figures, including former president Luiz Inácio Lula da Silva, for bribes paid in favour of 415 different politicians and 26 political parties.
Its enormous scale, depth, and sophistication make this case particularly significant: the criminals had constructed two computer systems entirely dedicated to processing anonymous payments for the syndicate. Using code names and encryptions, they protect the politicians and businesses involved from detection.
Odebrecht and its petrochemical subsidiary, Braksem – jointly owned with Petrobas – eventually agreed to pay 3.5 billion to US, Brazilian, and Swiss authorities. This case is one of the more famous and eye-catching, but multinational corruption comes in many forms.
The company Siemens had its cash-for-contracts activities exposed by German prosecutors who famously concluded that “Bribery was Siemens’ business model”. Between 2001 and 2007 the company reportedly paid out more than $800 million in bribes in order to win a multitude of international contracts, including $20 million to construct power plants in Israel, $16 million to build rail lines in Venezuela, and $14 million for medical equipment in China.
BAE Systems, one of the world’s biggest defence companies, is another company that was the subject of a series of probes over historical bribe payments. After an earlier, similar case was dropped over national security grounds, UK investigators launched a series of probes in 2007 relating to deals made in Chile, Czech Republic, Qatar, Romania, South Africa, and Tanzania.
Three years later the company admitted to US authorities, also investigating BAE for FCPA compliance shortcomings, that it had failed “to put appropriate anti-bribery preventative measures in place, despite telling the US Government that these steps had been taken”. BAE paid $400 million to close the case with US prosecutors.
This last case is particularly interesting as it has been attributed with bringing about the Bribery Act 2010 in the UK, regarded as one of the most complete and severe anti-bribery laws that there is. Some companies have made remarkable progress, admitting fault and improving their processes and standards for prevention of bribery through internally devised ethical programs. But this will never result in a fully clean system because ethics of practice are simply not the same in different parts of the world. Furthermore, promises and intentions are not enough.
Those who play fair want assurances that others have done the same in the past and will do so again in the future. What they need are universal industry norms cemented in independent certification.
One tool which has been gaining ground in the fight against bribery is the International Organisation for Standardisation’s ISO 37001 Anti-bribery Management Systems. The first of its kind, the framework is an international business tool helping companies and institutions tackle issues of bribery and corruption in a comprehensive way, across the entirety of their business structures.
With an independent, universally recognised standard for business practices in place, bribery becomes a more manageable problem. In the past, even well-meaning multinationals have gotten themselves into trouble by siloing their ethics within specific markets: what is allowed to happen in India doesn’t happen in the UK for instance. With a universal standard in place, this problem goes away. As more and more industry players take on ISO guidance, more will follow, and over time business cultures generally can change.
Even state organisations such as Central Banks see their organisational structure disrupted when ISO standards are applied. In Malaysia, the anti-corruption campaign launched in 2017 called for the use of the international standard ISO 37001 to be mandatory in all state authorities and all their suppliers.
This was extremely effective and its Governor Muhammad Ibrahim even had to resign a few months later to be replaced by the incorruptible Nor Shamsiah Mohd Yunus. From now on, the Central Bank must apply these standards carefully if it wants to maintain the hard-won trust of citizens and the international markets.
The advantages of ISO’s solution are that it is not specific to one country, pandering to a particular legal system, nor is it associated with one political agenda. As a neutral party, the ISO is able to be responsibly disinterested when it comes to policy making, following the guiding principle that universal standards are better for everyone. In an increasingly globalised economy, companies cannot tackle corruption alone, nor can they rely solely on local regulations.
Without going as far as global governance, international standards that are only imposed by their efficiency and independence are certainly a good solution. It is not for nothing that they are gaining more and more ground and succeeding in convincing more and more actors in the economic and political world.