Should I do a Masters in Corruption?

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Robert Barrington, Professor of Anti-Corruption Practice at the University of Sussex’s Centre for the Study of Corruption (CSC), looks at the arguments for and against doing a Masters degree in Corruption at this unusual time of a global pandemic and economic uncertainty.

Sitting at home during the lockdown, I’ve been trying to predict how many students will enrol next year on the Centre for the Study of Corruption’s  three Masters courses.  On the one hand, they are the only courses of their type in the world, and we have had good recruitment in the past (both here at Sussex, and online, and in Doha).  But on the other hand, we are in the midst of a global crisis,  international travel is mainly suspended – most of our students are international – and student numbers are predicted to fall across the board.

If I were making a decision about this right now, for myself, I would have in mind three considerations:
1. Will it be a worthwhile use of a year of my life?
One of the main draws for me to move from running Transparency International to join the Centre for the Study of Corruption was the exceptional quality of the faculty.  Academics need a good combination of communication skills for teaching, and analytical and writing skills for research.  CSC is unusually blessed in the quality of the faculty, and has gathered at Sussex some of the UK’s foremost experts on corruption.  It is the largest concentration of corruption academics in the country, and possibly globally. So as a student on the MA courses, there is a chance to learn from experts.
The courses are also characterised by the varied backgrounds of the students.  As well as a number freshly graduated from Sussex itself, we have students from all around the world, ranging from early- to mid-career professionals.  This year alone we have a serving police officer, a couple of government officials, a senior advocate from Transparency International and an elected official from the US, to mention but a few.  This mixture of faculty and students is highly stimulating; especially when studying one of the world’s most pressing issues.
2. Is it still worth enrolling even if some of the course is not run on campus?
For many Masters courses, the sudden switch to virtual teaching caused by the global lockdown will have been hard, both for students and the teaching faculty.  The CSC already runs a fully-online MA course, which can be taken over the course of several years in single-module bites.  This meant that as a teaching faculty, we have been very aware of the difference between a properly-constructed interactive online course, and simply recording lectures and posting them online.  In consequence, even if teaching does not start again on campus in the autumn, we are as well-equipped as any Masters programme around the world to deliver our courses to the standards we aspire to.

3. Will it help me get a job in a changing world?For undergraduates, the uncertain jobs market for the forseeable future provides a good rationale to do further study.  If the pandemic accelerates the shift into different ways of working and a more tech-driven working environment, those with advanced skills will be better placed.  The varied skills you learn on the Masters course – not simply about corruption – should stand our alumni in good stead.

But most of our Masters students at CSC are professionals already in a career.  What are the prospects if they take a break and study?  The first thing to say is that two of our Masters courses can be followed part-time – the LLM based in Doha, and the fully online ODL course.
For the full-time course on campus, I don’t think anyone can predict with confidence what the job market will look like for corruption specialists in summer 2021.  However, a few things are certain: corruption will remain a problem of both global and national importance – possibly more than ever; there will still be relevant jobs available, in the public sector, private sector and civil society, and those who are well-qualified will be best-place to secure them; and even in ‘non-corruption’ jobs, a thorough understanding of this complex issue may prove to be a valuable asset.
We are living in strange times.  Deciding to do a Masters course, in any subject, can be a big decision even in normal circumstances, especially if it means living abroad or giving up a secure job.  Whether you do the CSC’s Masters courses in corruption full-time, part-time, online or on campus, they are a specialised area.   You will become one of an elite group of academically-trained specialists in corruption.  It is impossible to predict the state of the world or the global economy over the next few years.  But you can be certain that this subject will remain fascinating, and studying it in-depth with some of the world’s experts will be a rewarding experience.

Details of the CSC’s three Masters courses on corruption can be found here https://www.sussex.ac.uk/research/centres/centre-for-study-of-corruption/courses-and-teaching

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Brexit is here and the EU’s procurement standards will no longer apply: what does this mean for Britain’s public procurement?

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Alvaro Quintero Casillas, who is currently taking the Masters in Corruption & Governance at the Centre for the Study of Corruption, looks at the UK’s options for public procurement reform post-Brexit, drawing on models from South Korea and Ukraine to conclude that the UK government has an unusual opportunity both to save money and make economic and social gains – if it creates a fair and transparent system.

Whether you agree with the idea or not, the United Kingdom is no longer a member of the European Union. According to the withdrawal agreement, the United Kingdom entered into a transition period that ends on December 2020 where the European directives on procurement will no longer apply.  This leaves us with a question: what kind of regulations should the United Kingdom implement regarding public procurement, especially for the control of corruption?

Due to its economic size, public procurement is an area with inherent risks of corruption. According to the Organisation for Economic Co-operation and Development (OECD), public procurement represents almost 32% of UK’s government expenditure, slightly above the OECD’s average. And we are not just talking about the purchase of paper and pens for the government: key elements such as the purchase of medicines for the NHS, the catering for schools, key infrastructure projects and the supplies for the defence sector are obtained through public procurement.

We might usually think that risks of corruption in procurement are an issue for developing countries, where official moguls – using Michael Johnston’s terminology – abuse the procurement procedures in order to enrich themselves, benefit their cronies or create patronage networks to be kept in power. However, in a paper from 2019, Adam Graycar found that around one quarter of the investigations of the New South Wales (Australia) Independent Commission Against Corruption were related to procurement. We do not have to look to the other side of the world to find evidence of corruption risks in public procurement:  research from Elizabeth David-Barrett and Mihály Fazekas found that in the United Kingdom around 10% of the procurement market is associated with partisan favouritism.

The UK does have the simple option of abiding by the General Procurement Agreement (GPA) of the World Trade Organization. However, the GPA standards are looser than those of the EU, as they do not even make mandatory the use of electronic procurement systems (e-procurement). Acknowledging the relevance of public procurement in the United Kingdom, as well as the risks of corruption in this activity, it is important to look for good practice that could be replicated. South Korea (KONEPS) and Ukraine (ProZorro) are two countries with interesting experiences in e-procurement that could provide a model for the UK.

In 1997, the Public Procurement Service of South Korea launched the KONEPS (Korea ON-line E-Procurement System), as a way to deliver efficiency and reduce corruption in the procurement processes of that country. Before its implementation, it was common to find collusion in the South Korean procurement processes, where the big conglomerates that formed during Korean’s industrialisation monopolized the contracts with the government, limiting the participation of small and medium enterprises, as noted by Jesse W. Campbell.

As a result, KONEPS created a more competitive environment, with an easier way to oversee the whole procurement process. The use of big data regarding public procurement allows easier audit, as well as establishing objective “red flags” of cases to examine in depth. The Korean Fair-Trade Commission’s Bid Rigging Indicator Analysis System (BRIAS) uses the information provided by KONEPS to assess the tenders and detect malpractice. Each month, BRIAS draws information regarding bidding prices, number of participants in each process and the method of competition employed to generate a bid-rigging likelihood score, allowing a better allocation of resources to audit those processes with higher chance of corruption.

This comprehensive e-procurement system has raised the trust in the procurement processes in South Korea: an integrity assessment conducted by South Korea’s Anti-corruption and Civil Rights Commission found that the integrity perception index score of the public procurement agency had increased from 6.8 to 8.5 out of 10 since the establishment of KONEPS. This system has been so successful that the OECD now cites it as an example of a good practice on public procurement.

Ukraine’s e-procurement platform ProZorro is a relatively new story. After the 2014 revolution, a multi-stakeholder group composed of government officials, Ukrainian volunteers, Transparency International and the Open Contracting Partnership gathered to discuss what an ideal procurement platform would look like. In less than two years, this developed the procurement platform that later became officially accepted by the Ukrainian government as part of the new procurement law of 2017.  Its outcome has been impressive: it has increased the average number of bidding competitors and this has enabled savings of around 20% in each tender.

The United Kingdom has around eight months to re-think its procurement rules. It has already convened a specialist advisory panel to advise on the changes, and promises a public consultation before the changes are made.  This is a big opportunity to have a world-class system, which saves costs for the public purse, is demonstrably transparent and fair, reduces corruption risk and also promotes economic, social and environmental well-being.  That is an achievable objective, as suggested in a report by Demos last October. Implementing a new electronic system that follows the good practice found in South Korea and Ukraine might allow the United Kingdom to save tens, even hundreds, of millions of pounds and improve the procurement market, with more actors and fairer rules. Brexit is already here, and reforming public procurement is a chance for the UK government to demonstrate there is an upside – for both the economy and society.

Posted in Politics

The struggle against corruption in public life in modern Britain

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Historian Ian Cawood, Associate Professor in British Political & Religious History at the University of Stirling, explores the findings of a conference funded by the British Academy which looked at why the quality of governance in the UK seemed to improve dramatically between 1800 and 1900.

Historians working on the campaigns against civic corruption in modern Britain have tended to focus on three issues: the campaign against ‘old’ (or political corruption) in Britain until 1832; the impact of the Northcote-Trevelyan report of February 1854; and the elimination of corruption in local government at the end of the nineteenth century.

The Oxford conference was organised to explore systematically the means whereby corrupt behaviours such as patronage, misuse of public office and the pursuit of personal gain were gradually challenged by a more meritocratic ethos in the public administration of modern Britain. The concept of a ‘public service ethos’ in administration has only recently attracted historical attention as, previously, studies of public institutions merely emphasised the growing ‘professionalism’ of the public services in Britain in the nineteenth century, as if the behaviours required by public servants were value-free and uncontested.

Some of the key themes which emerged from the conference were

1) The significance of the period between 1780 and 1830 in which a dominant discourse of mutual benefit among elites was replaced by an emphasis on ‘the common good’, ‘unselfish government’ and ‘Christian virtue’ by critics of the governing classes which gained traction among the wider public and formed a central aspect of the reforms to the Old Constitution after 1832.

2) The series of crises of governance, most notably the failures in the Crimean War of 1853-56, which, when reported by the press, were ascribed by critics to the failure to expunge fully the ‘culture of corruption’ and which led to a wave of anti-corruption drives throughout the Victorian period and into the twentieth century.

3) The significance of the ethical training and personal probity of ‘principal agents’ who could act as conduits of good governance and models of public service in particular bodies in particular locations: a form of ‘contagious virtue’. It was noted that such training tended to emerge from the Scottish universities, the nonconformist Churches, European examples, evangelical politicians and Benthamite philosophers.

4) The failure of key elements of the British establishment to accept the need for such ethical training among cultural influencers, such as Church leaders, University tutors and politicians, at Westminster, the provinces and across the Empire. The consequence of this failure was the haphazard and sporadic nature of anti-

corruption across the nineteenth century and the persistence of privilege, patronage and patrimony in the British polity and public administration.

5) If virtuous government, created by an institutionalised system of meritocracy was one of the key aims of Victorian liberalism, one must conclude that, in this respect at least, the project failed and Britain at the start of the twentieth remained firmly in the grip of privately educated, Oxbridge graduates who had a very narrow understanding of the social and economic conditions in which the bulk of the British nation subsisted. This has proved an intractable failure of the British political class since that time. How does this relate to the present day? A closing panel of experts reflected on contemporary challenges and what might be learned from the past. The panel included Anneliese Dodds (Oxford East MP); Robert Barrington, (then Executive Director of Transparency International UK); Rosemary Carter (Ofqual); Andrew Feinstein (Founding Director of Corruption Watch); and Oonagh Gay (Senior Researcher in the Parliament and Constitution Centre). The panellists agreed that although significant progress had been made over the course of centuries, corruption remains a significant problem. They assessed that it was not just that corruption continued to be practised by unscrupulous officials, ministers, MPs and businessmen, but that the very suspicion that those who hold public office were corrupt, served to undermine public trust in democratic governance, which itself was hugely damaging.

Among the key findings highlighted by the panellists were:

1) Electoral corruption was widespread before 1880, but improved significantly with the introduction of new laws and mechanisms of electoral oversight.

2) Personal probity and discipline of those in public office is a crucial guard against corruption, beyond the existence of rules and codes of conduct.

3) Corruption flourishes in an environment where public and private interests are allowed to mix, without adequate or robust administrative and public oversight.

4) Significant anti-corruption reform has been stimulated by high poverty and inequality, and as a reaction to political crises such as that which resulted in the widening of the franchise in 1832.

The panel concluded that the current issue of Brexit might prove to be a similar crisis to that of 1832, but that it also carries considerable perils, not least because it might prompt Britain to lower its standards of corporate transparency and public tendering and procurement in pursuit of favourable trading relation with other nations where standard of public life are less regulated or insufficiently monitored.

A full transcript of the plenary discussion – including the full comments on illicit financial flows, money laundering and lobbying made by Anneliese Dodds, the recently-appointed shadow Chancellor – can be found here.

Dr Cawood and Professor Barrington now intend to organise a series of symposiums across Europe to investigate the transnational history of anti-corruption, exploring the reasons for the emergence of and increasingly impartial, neutral and altruistic public service in a series of northern and western states between 1800 and 1880. Designed for academics, students, policy-makers, civil servants and other stakeholders, these events will provide a forum for discussing what lessons we can learn from history when trying to reduce corruption in modern administrative systems. Please contact Dr Cawood at ian.cawood@stir.ac.uk if you wish to find out more or participate in one of these events

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Corruption in government purchases during pandemic

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In pandemics and other emergencies, public procurement is even more exposed to corruption risks than is normally the case. In this blog post, CSC PhD Researcher Irasema Guzmán explains the risks and discusses key cases of emergency healthcare procurement being abused in the past, in Mexico and elsewhere.

Time is treasure during sanitary crises and pandemics. Many decisions must be made on how and what to spend. Every penny counts as it should be invested for prevention, detection and treatment, under threat of a virus spreading quickly and the potential collapse of the health system. Within this context, governments purchase under emergency conditions; hence, it is mandatory to buy fast, open and smart as there is a big opportunity for corruption to occur, with serious consequences for the treatment of patients.

In emergencies, there is high demand for certain items and as a result, short supply. For instance, many of us have found sanitizing gel to be overpriced; as soon as the population heard about the virus spreading, this item could hardly be found on the market. It also happens with necessary items in hospitals such as ventilators and personal protective equipment. Many companies in the business of producing cars or electronic gadgets have been asked to switch up their production lines to make healthcare items instead. As few companies are able to produce these goods, there is a high risk of bid rigging and collusion, i.e., a few firms colluding to decide who will win a contract. It also means that firms can conspire to set high prices. A lesson from the H1N1 swine flu is related to overpricing. The US pharmaceutical giant Baxter was accused of fraudulently overcharging for medicines as part of the Medicaid health programme which supports the poorest families in the United States. The company was found to have overpriced medicines by as much as 1,300%.

Secondly, an emergency requires purchases in the shortest time possible; for this reason, it is likely governments will purchase items by direct awards to firms instead of using fair competition procedures. In times of emergency, direct awards allow buyers to skip the long procurement procedure that usually involves firms competing with each other. But they also bring potential corruption risks; a direct award may benefit firms close to politicians’ circles that would not have won in more competitive conditions, and may be the subject of much lobbying. In 2009, during the H1N1 outbreak, Mexico acquired the vaccine directly from the laboratory Birmex instead of obtaining it from the firms that produced it, Sanofi Pasteur Inc. or Glaxo Group Limited. As a result, according to the Supreme Audit Institution (SAI), the Mexican government spent much more money than necessary, $118 million pesos (£5.6 billion), by the difference between the unit cost prices offered by the laboratories that produced the vaccine and the one who got the contract, Birmex. Therefore, there was a misuse of public resources and inefficient public spending.

Furthermore, there is a risk that suppliers may provide substandard equipment substituting lower quality components to reduce costs. In 2015, US prosecutors charged a man from Burkina Faso over a USD 12.2 million fraud after he misused international aid by buying 2 million anti-malaria nets at a very low cost and very low quality (without sufficient insecticide) from an unnamed Chinese company. The terrible consequence was to put people’s lives at risk.

Another risk is that supplies may not be delivered to patients. In 2010, the Mexican SAI found, in a revision of direct award contracts to attend the influenza H1N1 pandemic, seven amendments authorising extensions to companies of delivery due dates. That is, through such amendments, up to 160 additional days were granted for the supply of items.

Indeed, public infrastructure necessary to treat patients may not even be completed. After the influenza epidemic in 2009, the Mexican government decided to produce the vaccine in the country to reduce costs. In 2011, the firm Birmex was awarded a contract through an open international tender to adapt a manufacturing plant for the vaccine production. In 2013, the Mexican SAI found that this company spent more than 217 million pesos (£8.5 billion) in the construction of the plant, a cost overrun of 78 million pesos (£3 billion). The SAI also found improper payments authorised by contracting authorities that do not correspond to the aim of the contract. In 2015, Birmex agreed to finish the infrastructure through a public-private partnership (PPP) contract with the government. However, by 2017, the SAI found that the plant did not have the optimal capacity to bear the intended load; hence, it was agreed to demolish it and build a new one. The SAI concluded that these irregularities caused a major delay in the influenza vaccine production project (from 2009 until 2017) and involved a massive social cost with the final price 231.4% higher than had been envisaged when the PPP started in 2015.

Lessons from the past can inform improved policy. Evidence from procurement in pandemics shows that governments may not have purchased wisely and that emergency decisions involve potential corruption risks. The costs are high and clear: misuse of public resources and putting people’s lives at risk. It is possible to overcome this situation by improving accountability and disclosing procurement data. Open data allows tracking emergency spending: how governments decide which resources will be allocated to address the problem, how decisions are taken to purchase, which firms win contracts and whether the items are delivered in hospitals as planned. Furthermore, enforcement is needed. External audits are an ex-post instrument to track irregularities in expenditures and expose potential corruption cases, but we also need to punish actors involved in irregularities and transform ex-post actions to ex-ante policies to prevent corruption.

Posted in Governance

The Bribery Act 2010: Wider Impacts?

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Joseph Sinclair, a lawyer currently enrolled on the Masters in Corruption & Governance, evaluates the success of the Bribery Act on its tenth anniversary by looking at the issues of corporate culture and international impact.

The UK Bribery Act (UKBA) has seen some notable prosecutions and settlements, which have both tested key parts of the law in the courts, and shown that companies of all sizes can be held to account. Ten years on, we can also start to evaluate how the new law has worked beyond prosecutions.

Impact on Business Culture

The Bribery Act contained several innovative approaches, none more so than Section 7, the ‘failure to prevent bribery’ offence. The defence for this would be for a company to have in place adequate procedures to prevent bribery. This, of course, immediately gave rise to the question of what constituted an adequate procedure.

Although it provides a defence, Section 7 has also caused worry within the business community about thresholds and definitions: is corporate hospitality allowed?; can I take my client to Ascot or is this a bribe? This led to a F1 team expressing concern that the Act may drive corporate sponsors away from sport. To this end the UKBA required that the Ministry of Justice (MOJ) publish guidance.

Effective in 2011, it is unlikely to have allayed the fears of the F1 team (the MOJ’s answer is “it depends”). It nevertheless offers 6 practical principles for companies: proportionality, top-level commitment, risk assessment, due diligence, communication and training, and monitoring and review – the cornerstones of effective anti-corruption governance.

A quick search on Google shows there was no shortage of consultants, lawyers and accountants warning companies to get their houses in order. As the then chief criminal counsel at the FSA put it, “…the level of consternation about the Act has no doubt to some extent been fomented by professional advisers who have spotted a lucrative new practice area, and are frightening their clients to death about it”. And to some extent they are right to do so. The Act takes a “no ifs, no buts” approach. It is described as the strictest legislation in the area to date.

But all this is bluster if it does not translate into a different working culture for those engaged in business in the UK and overseas. The authorities cannot prosecute everyone that falls foul of the law. Like a prisoner in Bentham’s Panopticon, the business community should feel the authorities over their shoulder. Both Standard Bank’s and Airbus’s cooperation with Serious Fraud Office (SFO) investigations suggests that this is the case. As the following examples show, the Bribery Act has already achieved a great deal in setting corporate expectations and moderating behaviour.

In their Global Economic Crime Survey 2018, PWC reported that nearly a quarter of respondents had been asked to pay a bribe, compared to 5% in 2016. PWC’s explanation was that, rather than there being a sudden surge in global demands for bribes, there had been improvements in how businesses detected bribery, as the UK was now “…at the forefront of global anti-corruption efforts”. Three-quarters of respondents in the 2018 survey had a formal programme of ethics and compliance in place; 62% said that this included provisions for anti-corruption and bribery (above the 50% global average). Similar trends were identified in a survey undertaken by EY in 2017; 34% of respondents said that corrupt practices happen widely – up from 18% in 2014.

Goldstraw-White and Gill’s study gives further credence to the interpretation that British companies were becoming better at identifying bribery. Their survey showed that the UKBA had imposed additional obligations and raised awareness of anti-bribery good practice. One-third of respondents (64 organisations based in the Middle-East), had introduced some form of anti-bribery and corruption policy. A majority felt that leaders were committed to tackling corruption. Many had reviewed their policies in anticipation of the Act.

LeBaron and Rühmkorf undertook a comparison of the impact of the Modern Slavery Act 2015 and the Bribery Act 2010 on corporate accountability within global supply chains. They analysed the codes of conduct of 25 FTSE 100 companies within several sectors. In respect of the UKBA they found that “…the Bribery Act has achieved traction towards its aim of ‘steering’ company behaviour… companies had clear and strict policies… which they communicated to suppliers”. Bribery was a “genuine compliance issue”, with strict language used that highlighted the consequences with a greater reach in other areas of businesses’ reporting, such as corporate social responsibility and sustainability. Companies pro-actively engaged with bribery in their policies and private contracts with suppliers. This was contrasted with the language used in respect of the Modern Slavery Act 2015 (an area where the UK is considered a forerunner), which was “aspirational” and less stringent.

Collective Action

Since the Bribery Act was passed, entire sectors have entered into collective action initiatives. The combination of the Bribery Act and other legislation, such as the US’s FCPA, have given companies the impression that there is a tightening legal net globally which cannot be ignored.

Shipping is an area exposed to high corruption risks; it operates in corrupt environments, and offers services to high risk sectors, such as defence. It often uses intermediaries and has a lot of contact with public officials. It is an area particularly susceptible to facilitations payments.

An example of this is the Suez Canal, dubbed the “Marlboro Canal”, through which 8% of global sea-borne trade travels. Officials will often request cartons of cigarettes in exchange for safe passage and not imposing fines. A sailor’s Facebook post recounts how “…[a] high-ranking canal official reportedly demanded a bribe of 17 cartons of cigarettes, nuts and dried fruit for Ramadan, fruits, bottled water and on top of that helped himself to a hot meal onboard the ship, all while threatening to impose a fine of $20,000”.

Handing over the cigarettes is an offence under the UKBA with no exceptions (the CPS two-stage prosecution test aside). In response to these risks (of both bribery generally and prosecution under the UKBA and FCPA), a group of ship-owners established the Maritime Anti-Corruption Network (“MACN”) in 2011. The MACN now has over 100 members. It describes itself as “…one of the pre-eminent examples of collective action to tackle corruption”.

In 2015 the MACN launched a “Say No” pilot campaign in the Suez Canal, where ships would reject demands for bribes. Following positive feedback, it became a member-wide campaign. Members have reported a dramatic decrease in the demand for cigarettes and danger to the safety of crew and vessels. Those taking part have been passing through the canal without issue or delay. One company, Höegh Autoliners, found that the campaign made it easier for captains to refuse demands, and the frequency of demands decreased. Other shipping companies have expanded the campaign globally.

Changing the Narrative

Section 7 was described in 2011 by a corporate lawyer as potentially “alarming”. Perhaps rightly so. In essence, the structure of Section 7 shifts the burden to the defendant company to show that they had put in place sufficient measures to prevent bribery. Although each case will turn on the jury’s view, the Skansen case, which was the first Section 7 prosecution, seems to suggest that a company will need to be doing a great deal in order to use this Adequate Procedures defence successfully.

From the preceding sections, we can see that the UKBA is having a positive effect on the business communities’ conduct and attitude to bribery. They are putting measures in place to prevent bribery, and some are self-reporting where things go wrong to avoid prosecution.

It seems that Parliament has realised this because they have extended the Section 7 approach to tax evasion. Enter the Criminal Finances Act 2017. Part Three of this Act creates two offences. The first follows the wording of Section 7, but applies to UK tax evasion (a business facilitates UK tax evasion, irrespective of its location). The second applies to foreign tax evasion by companies incorporated, operating or undertaking the offending conduct in the UK. Both have a defence of having “sufficient procedures”.

To date there have been no prosecutions under the 2017 Act. In a survey conducted by Her Majesty’s Revenue and Customs (HMRC), a quarter of businesses were aware of the law and had made changes as a result. Although this may not make for happy reading at HMRC, it remains a positive development. It is unlikely that these offences would be in place without the Bribery Act as a torch-bearer.

Global impact

The change in narrative applies not only to domestic law, but to other OECD members. Across the Channel, the French national assembly has adopted Sapin II aligning France’s anti-corruption legislation with those of the UK and US. Article 17 draws inspiration from Section 7. It requires the senior or managing directors of specified companies (over 500 employees or part of over 500 employees with a parent company headquartered in France, and an annual revenue of €100 million) to put in place a corporate compliance programme to detect corruption in France and abroad.

Where next?

After ten years, we can see that the UK Bribery Act has had an impact on corporate culture and globally, as well as through prosecutions and settlements. The wider impacts are not solely attributable to the UK Bribery Act, but because it is part of a broader international approach linked to the OECD Anti-Bribery Convention.

However, there have been signals from the US that President Trump does not favour the FCPA; and the global Coronavirus pandemic may fundamentally change the world’s economic and political balance.

This has been a decade of success for the OECD Convention and spin-off national legislation like the UK Bribery Act. It is by no means guaranteed that the next decade will see such progress.

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Bribery, black markets and the Covid-19 crisis

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Professor Robert Barrington takes a look at the role of bribery in black markets, what might be heading for the UK in the coming months – and which part of the government is in charge of the response. He concludes that like the pandemic, there is a simple message. Get ahead of the curve: start planning now.

What happens when you get a restricted supply of high-demand goods, low levels of transparency about sourcing and pricing, resentment against the government and an easing back of social norms?

No guesses needed: it’s the black market. Alongside that sits a high likelihood of bribe-paying. Bribes help the dealers to obtain goods that are restricted in supply, ensure the authorities turn a blind eye to the dealers’ sourcing and trading in the goods, and allow consumers to access goods and services that they can’t otherwise get hold of.

You don’t have to look far for examples of where the black economy is much larger than the official economy, and it always – yes, that is always – correlates with higher levels of corruption. We are used to seeing that in areas of the world (Somalia, Afghanistan, etc) that are considered fragile states, or elsewhere in times of crisis (Haiti, for example).

But now, the entire world is in crisis; and production and distribution are interrupted by illness, lockdowns and poor planning. Supermarket shelves are empty while wholesale warehouses are full of food that is in the wrong place and wrong packaging for retail distribution, as it was destined for catering outlets which have now closed. There have seldom been better conditions for the global black market.

Not in Britain, surely?
Well, as with so much in the current crisis, look back to the Second World War. The black market was a well-known by-product. Did it coincide with an increase in bribe-paying? I’ve been having a quick look, and my views here are based on a quick trawl through the UK’s excellent Mass Observation archive (conveniently housed at the University of Sussex) and Mark Roodhouse’s fascinating book Black Market Britain: 1939-1955.

The general picture is surprisingly reflective of modern-day corruption in the UK: little evidence of systemic and organised corruption, some high-profile individual cases, and a widespread public perception that corruption is more serious than the establishment admits. Roodhouse quotes a Sheffield housewife whose diary entry for 1948 forms part of the Mass Observation archive: ‘We all know bribery and corruption goes on all the time.’

There were two effects at the time:

1. Tight government control of the market. The government’s objective was fairness, to be achieved through a system of coupons and rationing. It was concerned that a black market would undermine the controls it was trying to place on the supply, designed to ensure that the goods went initially to priority areas (like fuel to farmers and doctors) and then were evenly distributed throughout society.

2. Public discontent at rich people gaming the system. There was a widespread perception that people who had more money were getting a better supply, reinforced by occasional high-profile cases like the prosecution of Ivor Novello. It follows that if you have a black market, those who can afford to pay more will get more. That’s actually how the free market works in normal circumstances – the difference with the wartime black market being that the government’s policy was equal allocation and access for everyone. The advantages of wealth can work in two ways: the prices set in the black market are only affordable for a few; or people start paying (and taking) bribes for goods and services in the official economy.

Is this pandemic really like the War?
How does this relate to today? In the current context, this perception of unfairness could represent the long-term danger for the government. Our last crisis – the 2008 financial crisis – has left an enduring a legacy of public opinion feeling the rich got richer, bankers were bailed out and got away with it, while the poor suffered austerity. The Johnson Government’s reputation would be undoubtedly damaged by a resurgent, ungovernable and blatantly unfair black market. We may not be far away from people paying a supermarket manager for privileged out-of-hours access or paying inflated prices to get special access to the wholesale warehouses whose stock is stranded by the shutdown of schools and pubs. We are perhaps a bit further away from bribing an NHS official to get your child into hospital, but it has become a plausible scenario. Already in the EU before the pandemic, 19% of citizens said they had paid a bribe in the past year to access healthcare.

Alongside the wartime black market – thought of at the time as people doing illegal things and making money – sat a larger ‘grey market’ of people doing small favours for each other which was illegal but considered acceptable (think Corporal Jones the butcher slipping some extra steak to Mrs Mainwaring). Roodhouse describes this as ‘petty evasions that lay in the middle ground between legal dealings that society considered morally acceptable and illegal dealings that it did not.’ During wartime itself, the black market had some important self-regulating features, as both consumers and traders were generally governed by notions of patriotism and fairness. Do these exist today?

Learning from our current black market
It is not inevitable, but what we can certainly say about the current Covid-19 emergency is that the conditions are emerging both for a black market and for a related increase in bribe-paying. Supply is likely to be restricted as the infections and lockdowns affect both production and distribution. A black market is therefore likely to emerge over the next few months.

It’s worthwhile remembering that the UK already has a black market in some clearly identifiable areas – human trafficking (linked both the illegal immigration and the sex industry), counterfeit tobacco products, and – most obviously – the narcotics trade. This can tell us something already: that the UK is no different from other countries in terms of its propensity for black markets. It has benefited from a well-functioning official economy that allows people to buy what they need, and so no black market has been required in many goods.

There is almost no research that I am aware of that looks at the scale and prevalence of bribery within the existing black market in the UK. However, the UK Government’s Anti-Corruption Strategy and Serious & Organised Crime assessment both acknowledge the existence of the problem, and that is a good start.

Elsewhere in the world, the black market sees a thriving trade in illicit and counterfeit drugs. This might be a perfect time for those who peddle them so successfully elsewhere to introduce them into a UK health market whose practitioners and regulators are overwhelmed by the pandemic and whose patients are getting a bit restive. There are already shortages of paracetamol in supermarkets. While you are in lockdown at home, why not buy some online from a respectable looking website, even if you have not used it before? It’s only a short step – one click – away from buying those heart pills you could not pick up due to the queue at the pharmacy.

Who is actually in charge?
Who should we expect to take an overview of the corruption risk related to an expanded black market – and coordinate a response? Er…we don’t know. The UK has no anti-corruption agency; it surely cannot be the Prime Minister’s Anti-Corruption Champion, a part-time role occupied by a backbench MP, however capable he may be. Is he part of Cobra planning? No. Does he have the resources to do a risk analysis? No. Has anyone in government actually even thought about the corruption risk related to the pandemic and the black market? In all honesty, it is very unlikely.

Of course, none of this may come to pass. The pandemic may be brought under control with minimal interruption to supplies (though pictures of empty supermarket shelves give a foretaste of how quickly things can change). The black market may not expand beyond its current niche of organised crime trading in specific goods. Counterfeit and illegal medicines may still be kept out of the UK. The Government can hope for the best, or assess the risks and put in place sensible mitigation plans. Like the pandemic, the message on managing the corruption risks is the same. Get ahead of the curve: start planning now.

Posted in Business

Standards in Public Life in the UK: A 2020 vision

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It’s 25 years since the UK set up its Committee on Standards in Public Life. As author of the ‘Nolan principles’, the Committee has inspired other countries around the world to introduce codes of conduct for public officials and politicians, but what has become of the UK standards landscape in the meantime? In this post, CSC researcher Rebecca Dobson Phillips maps the landscape.

In the heat of our fast-paced, media-focused culture, it is perhaps inevitable that interest in public standards peaks in the wake of a scandal and then troughs in the quiet in-between when much of the real work is done. The 25-year anniversary of the Committee on Standards in Public Life (CSPL) therefore provides a welcome opportunity to reflect on public standards more broadly, as a public good with a frontline role protecting our democratic institutions from corruption, conflicts of interest and other forms of misconduct.

I was delighted to be commissioned by the Committee to undertake a new mapping exercise of the standards landscape in England and reflect on the key changes over the past quarter-century. The full review, published today, provides an overview of the standards landscape effective in central and local government in the United Kingdom. This offers a vantage point from which to view the landscape’s shape and form over time, its strengths and weaknesses, and challenges to the maintenance of public standards in the context of emerging technological, social and political pressures.

The public standards landscape is conceived broadly. It ranges from Westminster and Whitehall to the judiciary and local government, and also incorporates groups that formerly might not have been considered public entities at all, including political parties and third-party actors such as lobbyists and private sector providers of public services. This broad approach reflects the concerns of the CSPL as it has responded to the demands of a shifting political culture and the take up of governance approaches that have blurred the distinction between the public and private spheres.

The Mapping Exercise charts the embedding of standards through codes of conduct, transparency and accountability mechanisms, ethics training and tailored advice. However, the direction and speed of travel is uneven and there remains significant discretion particularly in political and judicial institutions, which have a preference for self-regulation and case-by-case judgments. These exceptions serve to maintain the sovereignty of political decision-making and the independence and impartiality of the judiciary. However, they also reveal the clear limits of bureaucratic accountability, highlighting the importance of simultaneously supporting democratic processes and the rule of law to ensure our institutions are well governed, responsive to the public interest and provide effective checks on power.

The upholders of public standards have a crucial role in anticipating challenges, whether these originate in society—through changing public attitudes, the role of technology and social media, and the influence of lobbying groups—or from within political institutions, manifest in the policy decisions made by those in power. Success at the ballot box provides governments with the democratic mandate to reform governance arrangements in pursuit of their stated policy aims. However, it is important to recognise that such reforms can compromise existing standards frameworks. The unintended consequences of changing institutional cultures and ways of working in the pursuit of efficiency and effectiveness can have ethical consequences, potentially increasing the risks to high standards along the way.

We have a long tradition of thoughtful and balanced responses to ethical issues, possess a widely distributed system of public standards, and for the most part have well-embedded cultures of integrity in our public institutions. But this is not a moment for complacency. We are experiencing a period of profound social and political change, which will likely test the limits of the standards regime. Public standards are not inalienable; to a large degree they rely on shared principles and trust in others, and this trust can easily erode during periods of change and uncertainty. In this context, the CSPL’s Seven Principles of Public Life are an essential reminder to all—whatever the pressures of the time—of the duty to act with integrity and without bias and in the public interest.

The Committee on Standards in Public Life first published this blog on 24 February 2020.

The Report can be accessed here.

Posted in Uncategorized

Building public procurement integrity in Jamaica

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Public procurement is one of the key ways of corruptly channelling money out of the state, not least because it is one of the few areas of public spending where there is significant discretion. In a well-functioning state, there are many bodies with an interest in controlling and overseeing procurement. Yet it is surprisingly rare to see all the parties together in the same room, talking about how they can work together. As CSC Director Liz David-Barrett explains here, that is exactly what just happened in an intense two-day workshop on analysing procurement data for integrity risks in Jamaica.

Our main partner, and co-organiser of the workshop, is the Integrity Commission of Jamaica. With a mandate to prevent, investigate, and prosecute corruption, one of the Integrity Commission’s core functions is to oversee public procurement. Moreover, it is because they – and one of their predecessor organisations, the Office of the Contractor General – have been collecting and publishing public procurement data since 2006, that we were able to select Jamaica as one of the countries of analysis in our GI-ACE research.

Jamaica was an obvious choice for our follow-on work, in which we are collaborating with the Integrity Commission to develop an online interface that will make it much easier to analyse procurement data. As well as having good data, there are a number of highly competent interested agencies in Jamaica, with various roles in overseeing contracting, and longstanding Department for International Development (UK-DFID) support for local agencies that work to fight grand corruption and organised crime.

The Integrity Commission expertly convened a group of potential users from a range of government agencies to attend our workshop. As well as their own investigators and monitors, and their data collection and analysis team, they invited several other organisations to the table. Over the two days, we learned about the many different ways in which analysis of procurement data could assist their work.

Instead of relying on a random sample, the Auditor General, for example, is interested in running a series of analyses of supplier risk, sectoral risk, and cost over-runs, as a preliminary risk assessment that would help them choose more selectively where to target their audit resources. Another government agency, meanwhile, is interested in matching up how much companies declare in income with the value of the contracts they have been awarded. Yet another wants to improve project implementation throughout the public procurement process.

The Public Procurement Commission, which is responsible for checking the credentials of companies that wish to register to participate in public tenders, is keen to develop a mechanism for evaluating contract performance. They also would like to identify conflicts of interest among public bodies and contractors, and create risk profiles for suppliers. Such information might inform their decisions to deny access to public contracts, or to downgrade or suspend the registration of suppliers.

Policymakers also are keen to build an evidence base that can inform future policy design, using the tool to compare competitive and non-competitive processes, assessing the impact of a change in thresholds, and to tracking efficiency in areas such as framework agreements.

Law enforcement agencies emphasise the generation of evidence about individual cases, which can include tracing conflicts of interest and gaining a sense of contract-level and supplier risk patterns.

There was huge enthusiasm in the room for developing a user-friendly tool to detect corruption in contracting. Our next step is to assess just how many of these needs we can meet in the online portal design. Much of that depends on the underlying data, but where we can’t immediately fulfil a need, we will be able to highlight areas where collecting more data could underpin enhanced analysis in the future.

The workshop has already had one big benefit: It helped create awareness and support networks among these varied agencies on how they can work together. One participant reported, “It was rewarding to get the different views on the challenges faced and the different suggestions and remedies; it also opened the gate for future collaboration,” while another commented, “The information from the other participants served to show the endless connections and the interconnectedness that can be achieved.”

Fighting corruption is partly about having the evidence base to design good policy, but it’s also about having the right teams in place to implement it.

This blog was previously posted by the Global Integrity-ACE programme.

Posted in Governance, Regions

Dos Santos files: what’s new?

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Robert Barrington, Professor of Anti-Corruption Practice at the Centre for the Study of Corruption, asks whether the Luanda Leaks are just another leak – or tell us something more about the world of global corruption.

In the age of the transparency revolution, we are growing used to leaks.  Wikileaks, the Panama Papers, the Paradise Papers, Luxleaks, Swissleaks, and so on.  It would be unsurprising if leak fatigue were to set in.  The media will become tired of the same old stories; the public will not want to read about them because the scandals all sound the same, and there is a lot of innuendo and few smoking guns.  Before we switch off about leaks, here are three things that strike me about why the dos Santos case could have longer legs:
1. Corruption (allegations of) lies at the heart of this case.  In many of the previous leaks, one can see a series of shell companies leading back to something like a privatised State-Owned Enterprise in a post-Soviet country in the nineties.  The origin of the money looks suspect, but it is hard to pin a charge of corruption on the acquisition of the funds.  In this case, the allegations are that corruption was firmly at play – as well as fraud and theft.  Allegations, I emphasise, but clearly about corruption.
2. The heat is mounting on professional enablers.  Much of the Luanda Leaks coverage has not been about Ms dos Santos, but about how firms of professional advisers (accountants, lawyers etc, variously called professional enablers or gatekeepers, depending on what level of empathy you are seeking) have facilitated the acquisition and (alleged) laundering of her wealth.  Were there not sufficient red flags that they should have approached client take-on with particuar care – or were the rewards so lucrative that the red flags magically became more orangey? The global law enforcement community has been getting steadily more worked up about the ‘enablers’ in recent years – respectable professionals who seem to make a mint and get off scot free by distancing themselves from the illegality.  But lawyers and acountants are now firmly in the cross-hairs of regulators, law enforcement agencies and the media.
3. Leaks work.  We know a great deal more about global networks of corruption than we did even five years ago, in large part thanks to leaks.  As well as shining a light on individual cases, they have other functions – for example, acting as a proxy public register of beneficial ownership, demonstrating the value and public interest of having information that is not solely available to regulators or law enforcement agencies.  Like them or not (and some people don’t, because they disclose confidential information) leaks have become easier in the tech age and are part of the transparency revolution.  But – it has not been so good for the whistlblowers (leakers).  All sorts of laws exist that protect the criminals and criminalise the leakers.  Rui Pinto, who was responsible for this round, is currently awaiting trial in Portugal.
By the by, Ms dos Santos has hired the fearsome law firm Schillings to sue the International Consortium of Investigative Journalists, which published and analysed the leaked documents.  A multi-billionaire taking legal action against a small NGO is normally a one-sided affair, irrespective of the merits of the arguments, illustrating the complex debate about whether the ultra-wealthy can buy better access to justice when defending themselves and their assets against corruption charges.
We discussed the case in our weekly ‘bring your own scandal’ discussion group this week, part of our MA on Corruption & Governance.  Three other excellent points we talked through were:
– The gender dimension.  Is this case getting more attention because the protagonist is not just rich but the ‘richest woman’ in Africa?  And if Ms Dos Santos were guilty, does this validate the corruption theory that women are less likely to be perpetrators of corruption and more likely to be victims, until they reach a comparable level of wealth and power, at which point things even out?
– Witch hunts.  Ms Dos Santos has claimed that not only is she innocent, but the cause of all this is a political witch hunt initiated by her political enemies in Angola rather than kleptocracy.  It is worth remembering that both can be true: someone can be both guilty of kleptocracy and the subject of a witch hunt by their political successors keen to ensure that there is no political comeback.
– People get hurt.  An associated banker in Portugal has taken his own life.  In the real world of corruption cases, that kind of thing happens.  But violence against suspects and witnesses pales into insignificance compared to the victims in countries from which the wealth has been looted – the loss of budgets for schools, hospitals, infrastructure, the incentives in the public services to be corrupt in turn, the deterrent to investors.
At first glance, this may look like just another leak.  But delving deeper, there is so much in the case that – whether the allegations are true or false – it is likely to be emblematic for years to come.
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Corruption; a world tour

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Last week, Transparency International published its annual Corruption Perceptions Index. In three articles published in newspapers and magazines around the world, Dan Hough, Professor of Politics, looks at what the CPI can – and can’t – tell us about corruption in the UK, US and China.

United Kingdom
In the New Statesman, Professor Hough says ‘We need to talk about corruption in the UK – many people have lost interest precisely at the moment when all the evidence says we need have our eyes wide open.’ Read his article here.

United States
Writing in the Washington Post, Professor Hough notes: ‘In 2019, the U.S. ranked as more corrupt on this international index. That happened last year, too. It’s tough to measure corruption, but Transparency International’s annual scorecard gives trends to watch.’ Read his article here.

China
Professor Hough asks in the South China Morning Post ‘Is China still on an anti-corruption road to nowhere, despite Xi Jinping’s campaign?’ Read his article here.

Posted in Regions