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Bribery and Corruption – do we need to be worried?

Author: Lorinda Kelly

Transparency International released the 2010 Global Corruption Barometer just before Christmas. Included in the report was a statistic that was surprising to many – 4% of the 1291 New Zealand respondents reported paying a bribe in the past 12 months. This was the same level as in Canada, Israel and Brazil and was higher than a number of other countries, including Australia, the UK, Portugal and Georgia. There was also a shared view from 73% of the NZ respondents that corruption had increased during the past three years.

A further disturbing statistic was released in an international Deloitte survey earlier in 2010 that found 4 out of 10 global executives were reluctant to disclose significant corruption incidents to authorities.

NZ legislation is well behind many other international jurisdictions, in particular the UK, where the newly enacted Bribery Act 2010 is currently a focus for business. So what should we be doing about this apparent increase in corruption? In our view, NZ business should be more proactive and follow the lead of the Brits.

NZ does not have a Bribery Act, or even a Fraud Act. The relevant legislation is the Crimes Act or the Secret Commissions Act. However, the scope of legislation in other jurisdictions will capture some NZ businesses. The UK Bribery Act applies to anyone who has a business presence in the UK, including associated persons. The Foreign Corrupt Practices Act (“FCPA”) anti-bribery provisions apply to "issuers," "domestic concerns," and "any person, while in the territory of the United States”. The Bribery Act is also wider in scope than the FCPA, in that it is not limited to foreign officials and it applies to the more passive act of being bribed, in addition to actively bribing another.

The common requirement for business throughout most international legislation, is to have procedures in place to prevent bribery. Having adequate procedures in place is a defence, stated in the Bribery Act, for any organisation that has failed to prevent bribery. The UK Ministry of Justice has set out six “principles for bribery prevention”:

  • Risk assessment;
  • Top-level commitment
  • Due diligence;
  • Clear practical and accessible policies and procedures;
  • Effective Implementation;
  • Monitoring and review.

A risk assessment should be conducted to identify both form and scope of adequate procedures required for individual businesses. Common to all organisations however, is a need to establish or embed the right culture. This requires:

  • A clear anti-corruption policy and code of ethics – visibly and consistently supported by senior management;
  • A zero-tolerance disciplinary approach and a clear response plan for addressing violations of anti-corruption procedures;
  • Effective monitoring mechanisms to provide ongoing assurance of compliance;
  • Regular awareness training on your ethics and anti-corruption stance to all staff at all levels of the business and other key stakeholders.

Criminal penalties outlined in the Bribery Act include unlimited fines and imprisonment for up to 10 years for individuals. Violations of the FCPA may lead to a criminal fine of up to $2 million per violation for companies, while individuals may face criminal fines of up to $100,000 per violation or imprisonment of five years, or both.

The potential criminal penalties are obviously significant, but the reputational damage of even being investigated will be considerable. Businesses that are not exposed to the international legislation should still be implementing or reviewing anti-corruption procedures as a matter of best practice. For those businesses who may be caught in the extensive scope of the Bribery Act or FCPA, taking pro-active steps now is a much more critical requirement.

For more information on anti-corruption procedures or the Bribery Act 2010, contact Lorinda Kelly.

Read the article –
Corruption rears head in NZ business


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