Sensible advice just in from the Basel Institute on Governance and Transparency International – just in time for the Ukraine Recovery Conference running 4–5 July in Lugano, Switzerland. The conference will see leaders from around the world pledge hopefully billions to finance Ukraine’s post-war recovery and reconstruction.
The recommendations include the need to:
prioritise the leadership selection process and reforms of Ukraine’s formidable anti-corruption institutions, including courts;
use transparent procurement systems for reconstruction efforts;
strengthen asset recovery systems so that money stolen through corruption in the past can be used to help fuel reconstruction efforts.
The Institute of Directors has launched call for evidence in an area that might be of interest:
This inquiry will focus on the impact of governance on innovation, not the full range of factors that influence companies’ decisions and behaviour. The purpose is to explore the extent to which companies’ governance arrangements and the governance framework within which they operate encourage or deter innovation, and to identify good practices that – if more widely adopted – can help good governance to become an active driver of sustainable value creation.
Improving the integrity of the UK Public Register – transforming into a custodian of accurate and detailed information
New mandatory identity verification relating to directors, beneficial owners and agents
New powers for the registrar to query on any information provided
Tackling misuse of UK registered entities for criminal gain & sharing suspicious activities with enforcement agencies
Housing registration of overseas entities and anonymous foreign owners of UK property
A timeline of key elements of the reforms – a look ahead…
Topical following Oliver Bullough’s ‘How to steal a trillion’:
Author and journalist Oliver Bullough traces Britain’s vital role in the growth of ‘offshore’ money laundering – from its origins in the City of the 1950s, through to its impact today.
In this omnibus edition of the series, he traces the origins of ‘offshore’ back to the sleepy City of London of the 1950s. A moment of inspiration fuses with the shock of the Suez Crisis to create the launch of a whole new approach to finance.
From there, he traces how offshoring developed through Britain’s links to an unusual number of islands – the ‘last pink bits’ on the old Imperial map, and Crown Dependencies, such as Jersey. Next he explores the arrival of Russian oligarchs in the 1990s, and the growth of the shell company.
This approach is firmly based on the evidence (scientific and empirical studies) of how humans behave and what works in maximising achievement of collective goals and outputs.
It re-invents traditional regulation (rules-inspect-breaches-sanctions-assume deterrence) by focusing on behaviour and outcomes, supporting those who are well-intentioned (enlisting society’s ethical values and principles with the state’s common goals of prosperity, growth and protection) and differentiating those who are not.
Key elements are:
to support people to behave well and constantly improve performance.
reliance on intrinsic motivation with supportive interventions rather than externally imposed authoritarian control (which is reserved for those from whom society needs to be protected).
building trust – through producing a convincing and adequate body of evidence that people have good intentions, competences, understanding, resources, and will do the right thing (based on ethical values), such as asking for help, reporting problems, cooperating to implement fixes.
involving everyone (all stakeholders) in a collaborative co-creative exercise.
In ‘Corruption from a Regulatory Perspective’ (Hart 2021) Professor Maria de Benedetto makes the case for a less-is-more approach.
What sets this book apart from the previous literature is how it brings together numerous related disciplines into a systematic whole – looking at rules and regulations during their “whole life-cycle”. It helps you consider how rules, corruption and controls are linked to regulatory effectiveness and why regulatory effectiveness is an important part of combatting corruption. And counterintuitive as it might seem, every rule that is created and every control that is devised to monitor compliance with the rule – also creates opportunities for corruption. So what to do?
I have been involved in anti-corruption efforts in various ways for over four decades. So, I was pleasantly surprised to discover an approach I had not heard advocated before. It had occurred to me that administrative corruption exists specifically in relation to laws, rules and/or regulation. It has also been part of my own values-based approach to advocate drafting rules and regulations carefully and keeping them to a minimum. Intrinsic motivation is more effective than extrinsic, rules derived motivation. Professor de Benedetto however covers new ground with her analysis and her recommendations. And, she is suggesting a better and more cost-effective way to “fight” corruption, without – basically – fighting.
You may be wondering, what is regulatory anticorruption and how might it help? Professor de Benedetto states that it “is intended to develop a diagnostic intelligence by limiting the use of troops in the war against corruption, in a certain sense by winning without fighting* (François Jullien, Traité de l’efficacité) to the greatest extent possible.” What is meant by this is that it looks at rules, rather than at administrative activities, and therefore considers how they can be drafted and adopted effectively long before any corruption is even contemplated. Another way of understanding this is that regulatory anticorruption carries out its anti-corruption assessment “much earlier and works upstream” in order to prevent countless potential acts of corruption from ever occurring. (p.77) Regulatory anticorruption can be applied when the rules are first made or reformed, i.e. in law making and in the regulatory delivery process when guidelines and other documents meant to ensure regulatory effectiveness are created. Managing rules allows the detection of opportunities for corruption rather than incidents of corruption (p94) and so occurs at a very early stage. Prevention, rather than cure.
Professor de Benedetto’s comprehensive and inclusive analysis of the regulatory anticorruption approach and all it implies is both readable and comprehensible. That’s a feat in itself. I would recommend it to anyone involved in anti-corruption, especially those working in policy and advocacy roles.
The exploration of the ways in which regulation itself increases corruption and provides practical and feasible ways of combatting this – without fighting- but rather by improving the regulatory stock (rules, controls, sanctions) and their flow (delivery). And, although addressed to the macro environment of lawmakers and regulators, I found much to consider for internal “compliance” systems that are often characterised by unnecessarily complicated policies and procedures, onerous controls and unevenly applied and often counterproductive sanctions, all of which crowd out the more powerful intrinsic motivation provided by values and ethical principles.
I have only begun to scratch the surface of the ideas and analysis presented in Corruption From a Regulatory Perspective, but I hope I have succeeded in convincing some of you to read it and consider its implications for your own work. We can continue to create quantities of ineffective rules and kid ourselves that we are fighting corruption or we can take a step back and consider the issue from a regulatory perspective and understand that ‘less is more’ if that ‘less’ is effective.
The ideas laid out in the book, when combined, suggest that we have been wasting much of our time in the past creating ever more complicated anti-corruption laws, regulations, controls and sanctions, while in fact our energies would have been better spent in other ways.
Find Corruption from a Regulatory Perspective on Amazon or directly from Bloomsbury, the publisher.
A call to action from the Society of Corporate Compliance and Ethics (SCCE):
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Submissions are welcome from both SCCE members and non-members.
Lots of reasons to tune in when the good people at Nordic Business Ethics put on their 4th annual conference:
“Is your organisation next out? Whistleblowers and investigative journalists ensure that we keep reading about companies and their short comings. Sometimes the conduct is outright illegal, other times it is perceived as unethical and often times only lawyers and the involved persons care about the difference.”