Compliance and anti-corruption on the 2020 G20 agenda: recommendations of the business community

November 2020 | SPOTLIGHT | FRAUD & CORRUPTION

Financier Worldwide Magazine

November 2020 Issue

Since 2009, anti-corruption has been a part of the agenda of the G20 – the international forum for governments and central bank governors from 19 countries and the European Union (EU) founded in 1999. The members together account for around 80 percent of gross world product, 75 percent of world trade and more than two-thirds of the world’s population. Organised on a rotating basis, the G20 process interacts with representatives from various parts of society. The B20 is the official G20 dialogue with the business community.

With its integrity and compliance taskforce, the B20 has contributed significantly over the years to the Anti-Corruption Working Group of the G20 (ACWG). On 1 December 2019, Saudi Arabia assumed the G20 and B20 presidency. ‘Transforming inclusive growth’ is the motto of the current B20 process. One of the six B20 taskforces is the ‘integrity and compliance taskforce’, with 107 members from all of the 19 G20 countries and the EU supported by knowledge and network partners. Building especially on the previous B20 policy recommendations from Germany and Argentina, the current taskforce has just concluded the policy development process and will recommend to the G20 leaders three main recommendations to foster integrity and compliance in the fight against corruption.

B20 policy recommendations

This year’s B20 has faced exceptional challenges due to the global coronavirus (COVID-19) pandemic. The crisis has exposed the fragile environment we are all operating in and illuminated that responsible business conduct and international cooperation are crucial components to effectively counter the pandemic and its adverse consequences.

With the 2020 policy recommendations, the business community therefore advocates greater transparency, reinforcing integrity and fighting corruption by requesting that G20 member states focus on three critical topics: (i) pursuing a culture of high integrity in the public and private sector; (ii) leveraging emerging technologies to manage corruption and fraud risks; and (iii) enhancing integrity and transparency in public procurement. The policy recommendations are partially built on previous years’ B20 recommendations to emphasise the importance of effectively implementing the G20’s current and prior anti-corruption commitments.

Recommendation 1: the G20 should pursue a culture of high integrity in the public and private sectors

Combatting and preventing corruption and strengthening integrity is a top priority for many governments around the world. National anti-corruption plans play a central role as a roadmap for building a culture of integrity. The B20 has therefore suggested that the public sector should engage with the private sector to implement or improve national anti-corruption plans and to adopt new collective action initiatives.

Governments will benefit from such collaboration. They can learn from the private sector’s experience and use their expertise and local insights to establish and implement tailored and robust national anti-corruption plans. The B20 stresses that such plans should comprise detailed risk assessments to identify vulnerable industry sectors. Collective action, with an emphasis on promoting a culture of integrity and clean business, as well as the adoption of innovative technologies, is a key pillar of action.

A critical component to enhance a culture of integrity is the support and protection of whistleblowers. The B20 has therefore called on the G20 to strengthen laws protecting whistleblowers and incentivise direct reporting to governments. This includes implementing cutting-edge whistleblower communications technologies that can increase the quality and quantity of misconduct reporting. To enable continuous improvement, national whistleblower protection frameworks should be reviewed and assessed periodically. The private sector offers its support to the G20 by sharing best practices in managing whistleblower programmes.

The B20, furthermore, recommends bolstering the role of women in the fight against corruption and actively promoting their participation in public, economic and political spheres in combatting corruption. Concretely, gender-specific data should be used to educate and train women to resist and report solicitation. Sexual extortion must be penalised and women who report it must be protected.

Recommendation 2: the G20 should leverage emerging technologies to manage risk relating to corruption and fraud

The G20 ACWG in 2018 already highlighted the need to harness the risks and benefits of technology in the fight against corruption. They not only inherently have the ability to enhance effectiveness and efficiency of government services – by increasing transparency in public processes and decision making – they also significantly contribute to building and protecting public trust. Hence, the second pillar of the B20 recommendations focuses on how governments can use technology to enhance beneficial ownership transparency with a focus on digital identities and digital national public registers which will contribute to more effective (third party) risk management across all industries, including the public sector.

Consequently, the B20 asks governments to comprehensively and consistently adopt digital identity standards for individuals and companies to help verify beneficial ownership data. The creation, collection, validation and maintenance of beneficial ownership information should be standardised by adopting global frameworks, such as guidelines and recommendations from the Financial Action Task Force (FATF) on digital identities and beneficial ownership.

Furthermore, the B20 advocates devoting greater focus to establishing digital public national registers, to make it mandatory for companies to disclose their beneficial owners. While some countries have enacted relevant legislation, many G20 countries still do not have established registers, even if this was already recommended by the B20 in prior years, in order to promote transparency among different public and private stakeholders.

Digital transformation offers a wide range of promising technologies that can be used to improve data quality and data sharing among national registers. The B20 offers its support to the G20 to help assess the technology landscape and to develop relevant data standards in the form of a joint technology innovation project.

Recommendation 3: the G20 should enhance integrity and transparency in public procurement

The current pandemic has evidenced the vulnerability of public procurement to corruption and fraud. According to the ‘Organisation for Economic Co-operation and Development (OECD) Foreign Bribery Report (2014)’, more than half of foreign bribery cases occurred to obtain a public procurement contract. The consequences of corruption in public procurement are dramatic, as public funds are lost through misallocations or higher expenses, and governments receive lower quality goods, services and works – all of which leads to distortion of competition, limited market access and reduced business appetite for foreign investors.

Given the significance of efficient and effective public procurement for a healthy and sustainable economy, it is important that governments ensure transparency and promote integrity and accountability across the entire public procurement lifecycle. An open, fair and transparent public procurement process is a crucial foundation. It will not only help deter corruption, but also enables and protects an equitable business landscape where participants can compete in a compliant and effective manner.

Among other things, policies should therefore require making information around public procurement publicly available. This should comprise: (i) procurement contracts executed on a sole source basis as far as possible; (ii) procurement emergency and non-emergency policies and procedures; and (iii) information and data across the entire procurement lifecycle by promoting open contracting data standards (OCDS) and ensuring alignment with the G20 anti-corruption open data standards. Furthermore, governments are requested to implement e-procurement systems as well as strong internal control systems.

In order to foster integrity in public procurement, the B20 recommends providing incentives to reward high standards of ethical business conduct. Companies engaging in public procurement processes, such as public tenders, should be required to have a high standard code of ethics and adopt a process to monitor and evaluate the implementation of their ethics policies. Disclosing beneficial ownership information should be another relevant obligation in order to address potential conflicts of interest.

In addition, compliance and ethics evaluation criteria should be an integral part of procurement processes, as well as sanctions policies to respond to unethical conduct or violations of relevant law and regulations. As part of the reward approach, small and medium-sized enterprises (SMEs) should be empowered to maintain ethical business standards by investing in integrity and transparency training programmes. ‘Integrity pacts’ with private companies should also be considered to help establish a more robust public-private partnership and extend integrity standards to private companies that are applicable to the public sector.

As a third component to protect public procurement from corruption and to increase accountability of government officials, the B20 recommends fostering greater integrity among officials in public procurement functions. This can be achieved by implementing clearly articulated integrity standards, conflict of interest policies and asset declarations of such officials in accordance with article 8 of the United Nations Convention Against Corruption (UNCAC). Transparent and independent channels should be established that allow reporting of cases of corruption or any other misconduct. This should be complemented by an increased professional commitment to and capacity for the procurement skill set that focuses on governmental leading practices for civil servants and students seeking to advance and standardise procurement skills.

Conclusion

The policy recommendations of the integrity & compliance taskforce at B20 Saudi Arabia are based on the belief that combatting corruption and fostering integrity must be a joint effort addressing all parts of society. The COVID-19 pandemic does not stop at national borders and the same holds true for corruption and misconduct. These are global challenges that require international cooperation in order to develop adequate and effective countermeasures. The G20 and B20 process is an important contribution in advancing this dialogue.

Klaus Moosmayer is chief ethics, risk and compliance officer and Rauno Hoffmann is global head of policies, advisory and anti-bribery at Novartis International AG. Mr Hoffmann can be contacted by email: rauno.hoffmann@novartis.com.

Klaus Moosmayer and Rauno Hoffmann

Novartis International AG