Last Tuesday, we carried the second in a series of articles on the presentations of key speakers at the University College of the Cayman Islands Caribbean Anti-Corruption Conference held on 19-21 March 2014. We highlighted aspects of the presentation by the Chair of Transparency International, Dr Huguette Labelle. We continue today with a conclusion of her presentation in condensed form, as follows:
There must be complete transparency in government. It is crucial to build transparency into every stage of the system to enable people to check promises against the reality and to give citizens a higher degree of trust in their government officials and parliamentarians. Information is not a gift, it belongs to the people. Access to information legislation with systems in place to grant access is essential. Many public authorities are recognising the benefits of transparency and are proactively publishing all public information. When information on all government revenues, budgets and their disbursements is publicly available, people know how money is available for their school, for their health clinic for their community, and they can question when the services are not rendered. In Brazil, online data on budget execution and revenue collection of the federal government is updated on a daily basis.
Procurement and construction are highly vulnerable to corruption for all countries. It is estimated that $50 trillion of infrastructure spending will be required by 2030. Much of this massive spending will be contracted out to private companies, and the nexus of public and private sector can be a major corruption hotspot. The emergence of e-government makes it possible to carry out lucrative public tenders online. The use of integrity pacts brings together officials organizing procurement processes and potential suppliers under the supervision of an independent observer. Bidders agree that the pact would be enforced by severe sanctions for anyone breaking the “no bribe” agreement. Another mechanism is the use of social witnesses, or independent professional monitors during the course of a project. In Mexico, such “social witnesses” are required by law and have overseen more than $60 billion of public spending.
Given the global nature of corruption, it can be very hard to fight back without involving all stakeholders. Corruption often occurs at the nexus of business and government, so these need to work together to find sustainable solutions. One area where cooperation is clearly needed is the extractive sector. Too often, money from extraction of natural resources is not going to the people. The Extractive Industries Transparency Initiative has been successful in building voluntary agreements for governments and business to disclose extractive payments.
The Construction Sector Transparency Initiative has taken a similar approach on complex issues such as information disclosure, environmental impact and pro-poor investments. Both the public and private sector participants are required to disclose data about public contracts to ensure that stakeholders are better informed about public tenders. Some of them come together to exchange best practices on anti-corruption and compliance measures and training. They also join together to approach government authorities where solicitation of bribes is prevalent.
A huge potential in combating corruption through education lies in incorporating ethics in the education system from the youngest classrooms to the PhD level. This can happen by making ethics part of regular courses as well as through a separate ethics stream. Inculcating basic ethical values needs to start at the youngest age through appropriate learning activities. A number of institutions are moving in this direction. Some time ago, Transparency International’s chapter in Chile devised a whole year programme of teaching materials for students in Grade 3. In agreement with the Ministry of Education, these were sent to 1,500 schools throughout the country. Our chapter in Palestine prepares illustrated children’s books that deliver sophisticated ethics messages through the medium of traditional fairy tales. Other Transparency International chapters target older students by helping teachers design courses in civic education.
There are good examples of ethics courses at university level in cooperation with international organisations. Transparency International is engaging with business schools to promote ethics with future leaders and to increase the capacity of our local chapters to work with their domestic private sectors. TI is also working with CEMS – the Global Alliance in Management Education. CEMS is a result of cooperation between leading business schools and universities with multinational companies and NGOs.
The UN Global Compact has prepared a course in ethics for MBA students. This is being piloted in 200 universities and hopefully after will be brought to scale. Teaching ethics throughout the education system will sow the seeds for better societies. With nearly a fifth of the world’s population between 15 and 24 years old, young people have the potential to stop corruption both as the citizens of today and as the leaders of tomorrow.
The education institutions must function at the highest level of integrity, without any corrupt practices. If they do not, no matter how much ethics you teach in the curriculum, the students will be conflicted about what ethical behaviour should be, and those courses will have little value.
These are important steps for promoting the role of ethics in societies. But we should not overlook how interdependent ethics in one society is upon global society. The opportunity to get away with corruption in one country can undermine efforts to prevent corruption in another.
A major priority for the world today is to set higher standards for transparency in important areas like taxation. There is a greater take up of global standards than ever before, with emerging powers committing to anti-corruption standards through their membership of the G-20 leading economies. If we could limit the global loopholes that allow money laundering and tax evasion, it would be a significant way of dealing with poverty reduction, fraud, illicit trade and contributing to country fragility and conflicts.
The G-20 has already adopted a number of measures including the adoption of the OECD Base Erosion and Profit Shifting plan, which, if implemented, could see a fairer distribution of taxes paid by multinationals. Another is the realisation of automatic exchange of information as a new global standard, presented in February 2014 and to be finalised mid-2014 with roll-out in G20 countries before 2015. Leaders acknowledge that the next challenge is commitment to and implementation of this standard. It will be important to find a model that is inclusive for developing countries.
The OECD has recently published a new single Standard for Automatic Exchange of Financial Account Information. This means that it should be easier for tax authorities to work together to promote financial integrity and help prevent the flight of capital and tax evasion. At the moment, many tax revenue authorities have to go and chase information from other revenue authorities if and when they suspect foul play. This new standard means the information will be exchanged automatically on an annual basis between countries that sign up.
This new global tax transparency standard was endorsed by G-20 leaders meeting in St Petersburg last year. The UK initiated a pilot automatic exchange of information programme while France, Germany, Spain, Italy and South Africa have signed up. The G-20 has pushed forward on the issue substantially in the last few years and this standard, if and when it becomes truly global, will hopefully have a real impact on the global nature of illicit financial flows.
While the G-20 has also recognised the need to reduce hidden company ownership, the G-8 has moved faster in this area. Incorporation of beneficial ownership information into annual, public corporate registries would help tackle the problems of illicit flows. The UK has been leading on the publication of beneficial ownership, putting it high on the agenda of the G-8 last year. It led by example by announcing that companies in the UK will have to publish the names of their owners on company registers. Earlier this month, the European Parliament voted in favour of Europe-wide public registries of beneficial ownership.
Every country has a responsibility to put in place effective anti-money laundering measures. Anonymous firms and secret bank accounts should not be used to launder the proceeds of corruption. Governments and banking supervisory authorities should require banks to go further and improve their Know Your Customer procedures. Efforts are needed to improve information sharing regarding politically exposed persons (PEPs) who are at high risk for money laundering and other illicit activities. Minimal regulations lead to a race to the bottom.
Today, corruption is one of the most talked about problems. We need to work together to stop corruption before it becomes the norm and reaches epidemic levels. Caribbean countries have the energy and fortitude to show the way in the fight against corruption. Each one of us can make a difference by leading ethical personal and professional lives and we can all make a greater difference by joining together – civil society, academia, governments and business – to ensure that life in our community, at work, and in our country is our free of corruption.