A Common Approach to Mitigate Corruption, Environmental and Labor Risks in Global Supply Chains

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Photo Credit: Wikipedia

The challenge of improving ethical standards in global supply chains begins with the complexity of today’s commodity networks. Richard Locke, responsible for supply chain management in such leading firms as Nike, Cola-Cola and HP, indicates current challenges come from two major shifts from supply chains in the past: changes in the geography of global manufacturing – from advanced industrial states to developing countries, and in the organization of production – which includes thousands of independent suppliers typically located in emerging markets.

This shift has important implications for achieving international ethical standards. There is a lack of visibility of second- and third-tier suppliers and gaps in accessing real-time information on supply chain activities, disparate local regulations that may not integrate well with industry requirements, and the inherent unforeseen risks of being a small business. Simultaneously, legal and regulatory developments as well as consumer pressure across the global North are pushing multi-national corporations (MNCs) and their third-party providers to have measures in place that comply with global anti-corruption norms, and environmental and labor standards.  Read More...

The Private Sector’s Real Experiences Help Measure Corruption

Opinion Ilustracion de Francina Cortes

After two decades of global anti-corruption efforts, it is quite clear that deterring and tackling corruption is a key challenge for any country. Throughout, scholars and practitioners of corruption have broadly agreed on a working definition of corruption – the misuse of public office for private gain. Scholars and practitioners have also agreed on its nature and prevalence, as well as on the dramatic economic, political and social costs it imposes in both the public and private sectors. Yet, the measurement of corruption itself remains a major challenge. Corruption is said to be an unobservable phenomenon due to its informal and hidden nature, and often has diverse meanings in different cultural and historical contexts.

How accurate and reliable are existing – and commonly used – measures of corruption?

Since the 1990s, anti-corruption research has widely used perception-based corruption measures. Transparency International’s Corruption Perception Index (CPI) and the World Bank Governance Indicators (WGI) are surely the most well-known indices based on surveyed respondents’ perceptions, attitudes, and opinions towards corruption.  Read More...

INL Supports Global Anti-Corruption Efforts

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Photo Credit: Bureau of International Narcotics and Law Enforcement (INL)

CIPE Director of Multiregional Programs Anna Kompanek conducted the interview on June 29th at the Washington, D.C. office of the Bureau of International Narcotics and Law Enforcement (INL) division at the United States Department of State

Can you introduce yourself and state your role at the Bureau of International Narcotics and Law Enforcement (INL) division at the United States Department of State?

RL: I’m Robert Leventhal, Deputy Director of the Office of Anti-Crime Programs. I oversee teams working on issues such as anti-corruption, wildlife trafficking, international crime, as well as a global series of international law enforcement academies.

MT: My name is Marianne Toussaint, I am the Anti-Corruption Team Lead. I manage the team dedicated to anti-corruption affairs; it includes five team members and we focus on global and regional multilateral and foreign assistance programming and policy relating to anti-corruption.

Can you offer some examples of how INL works in the global anti-corruption space?  Read More...

Cost-Effective Online Anti-Corruption Compliance Training

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Making anti-corruption training widely accessible and scalable in this day and age often means taking it online. Most multinational companies have done exactly that to extend the reach of their training to employees and subsidiaries globally. Yet, few training resources exist for local companies in these countries who aspire to join global value chains. To help fill that gap, CIPE launched an interactive, online anti-corruption training course based on its Anti-Corruption Compliance guide for mid-sized companies in emerging markets. The training course is designed to teach executives and anti-corruption compliance and ethics officers how to identify, assess, and mitigate corruption risks in their companies. The course involves approximately 40 minutes of instruction and contains four interactive modules that test knowledge and understanding. While the course itself is free, upon conclusion users have the option to purchase a certificate of completion for a small fee.

This online course is designed especially with newly appointed compliance officers in mind.  Read More...

A Shift towards Mandatory Anti-Corruption Compliance?

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Photo Credit: Inside Reg

Private sector anti-corruption compliance is predominantly associated with corporate corruption prosecutions, sanctioning, and debarment, with some positive examples of voluntary integrity building, as in the case of Thailand. Companies, regardless of jurisdiction, are focused on compliance and the required due diligence under the United States (U.S.) Foreign Corrupt Practices Act (FCPA) and/ or the United Kingdom’s UK Bribery Act, especially those seeking access to projects funded by the World Bank and similar development agencies. For companies caught in corrupt practices, anti-corruption compliance programs (or lack thereof) have become a crucial factor for successful conclusion of criminal or debarment proceedings.

Private sector entities in emerging markets that wish to do business with multi-national corporations subject to U.S. or UK rules also have a vested interest in this topic as corruption risk management and due diligence is increasingly becoming a notable condition of contracting and procurement proceedings. However, globally anti-corruption compliance has yet to become a mandatory element of doing business, but this may be about to change.  Read More...

The Unsung Protagonists of Corruption in West Africa

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Photo Credit: Lattitude Canada, Wikimedia Commons

This post is based on a blog originally published on Corporate Compliance & Ethics Africa

It is a basic economic principle that a market exists because there is the concurrence of demand and supply or someone willing to buy and someone willing to sell goods or services. Similarly as it relates to bribing public officials for business advantage or other more egregious purposes, you must have someone willing to give the bribe and the public official willing to take a bribe.

Economists and private sector players propose that in West Africa, the demand side of corruption (public sector) has cultivated and nurtured a system where the private sector is coerced to partake in corruption in order to be successful. The result is an established system involving a series of illegal operations accompanying the actual demand and receiving of bribes (“kickbacks”, “favors”), creating an atmosphere within the private sector that undermines integrity.  Read More...

People-Planet-Probity

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Photo Credit: Wikimedia Commons (https://commons.wikimedia.org/wiki/File:KPK_Logo.svg)

For anyone with even a passing interest in anti-corruption issues, the headquarters of Indonesia’s Corruption Eradication Commission (KPK) is a sight to behold. Entering the lobby, visitors see a floor-to-ceiling glass wall, and just behind it sit journalists with a clear line of sight to view recently arrested government officials as they enter the KPK building for processing. Outside, three to four satellite TV news trucks are often parked, underscoring the symbiotic relationship between Indonesia’s free press and what is arguably the world’s most powerful anti-corruption agency.

Given the KPK’s authority in Indonesian society and its recent commitment to engage the private sector, Jakarta is an obvious destination for the Center for International Private Enterprise (CIPE) to test a new anti-corruption concept. For the integrated compliance pilot project to work, CIPE needs a country with a strong, independent body like the KPK, along with a dynamic economy, robust labor and environmental NGOs, reliance on labor-intensive agricultural exports, and a significant connection to global value chains.  Read More...

‘Pay by Results’ in International Aid Sparks Questions about Private Sector Compliance

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Photo Credit: Peter Linke (via Flickr)

There is an ongoing debate regarding ‘pay by results’ in the international aid community. The pay by results (PbR) model is one in which aid recipient governments only receive donor funds upon achieving an agreed upon outcome – number of schools built, children inoculated, etc. For example, if the goal is to build sustainable road infrastructure, then the donor funds will only be released upon completion of the project, following an independent audit that the road meets all necessary standards. The idea is that this would shift incentives away from corruption – a government official is less likely to select the cheapest contractor offering a kick back if a poorly constructed road will not lead to payment by the donor aid agency.

This potentially sector-altering shift in development aid is largely in response to the perception that much of aid funding is lost to corruptionRead More...

Cleaning Up the Skies

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Photo Credit: Janak Raja via Flickr

Throughout its forty plus year history, European aircraft and defense group Airbus has been no stranger to controversy. Whether it was the long-running investigation into alleged corruption in an Airbus subsidiary operating in Saudi Arabia or an insider trading investigation involving company shares, scandal seems to follow Airbus, no matter what endeavors the company pursues. However, the latest corruption probe involving the European defense group might be the case that finally forces reforms throughout the Airbus Group.

In August 2016, the UK’s top anti-corruption watchdog, the Serious Fraud Office (SFO), opened a formal investigation against Airbus into allegations of fraud, bribery and corruption in France, Germany and the UK. The investigation is related to irregularities involving third party consultants and the sale of passenger jets overseas. According to the UK’s 2010 Bribery Act, “the bribery risks associated with reliance on a third party agent representing a commercial organization in negotiations with foreign public officials may be assessed as significant and accordingly require much more in the way of procedures to mitigate those risks”.  Read More...

Third Parties don’t have to be the “Third Rail” of International Development

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Photo Credit: Richard Masoner via Flickr

Third parties lie at the heart of corporate compliance risks as 90% of FCPA cases involve external intermediaries. A third party is any person or entity that is not a direct hire or main party to a transaction – typically a contractor or an out-sourced service provider. Examples of third party misdeeds in international aid flows often become stories of national interest, propelling conversations about the efficacy of international development to the point that it is becoming a political third rail. That said, the same practices that mitigate third party risks for multi-national firms are applicable to the international development sector as well. As a result, third parties do not have to be the third rail for donor governments and international development charities and private enterprises.

As in any industry, firms and organizations working in international development cannot directly control the actions of third parties.  Read More...