Anti-Corruption Summit puts spotlight on transparency

World leaders, companies, and civil society came together at the first-ever international Anti-Corruption Summit in London last month to champion the fight against corruption on a global scale, with many countries committing to specific action plans and a clear focus on transparency.

Now the real work begins. “This summit will not be a single one-off moment,” U.K. Prime Minister David Cameron, who sponsored the summit, said in remarks. “We are building a global movement against corruption.”

All countries represented at the summit signed the first-ever global declaration against corruption that sets out their shared ambition to tackle it. Additionally, the summit communique set out the common approach that all countries will take, while a series of country statements set out the full range of concrete actions that individual countries intend to commit to.

For the most part, however, the overall summit was less about anti-corruption than it was about transparency. Several initiatives to come out of the summit run the gamut from new proposals that will directly affect companies—particularly foreign companies that own or want to buy property in the United Kingdom and those that contract with the government—to other initiatives that can only be described as aspirational.

Greater transparency around beneficial ownership information, in particular, was a key topic of discussion, particularly in light of the Panama Papers. U.K. Prime Minister David Cameron took the lead, announcing that foreign companies that currently own or want to buy property in the United Kingdom will be forced for the first time to make public who really owns them.

Foreign companies own around 100,000 properties in England and Wales. Over 44,000 of these are in London.

Furthermore, foreign companies that bid for central government contracts in the United Kingdom also will have to join this new public register of beneficial ownership information before they can bid. This will be the first register of its kind anywhere in the world.

Cameron said the new register for foreign companies will mean corrupt individuals and countries will no longer be able to move, launder, and hide illicit funds through London’s property market and will not benefit from its public funds. Five other countries—Afghanistan, France, Kenya, the Netherlands, and Nigeria—announced their intent to create public registries of beneficial ownership.

“This will mean that everyone in the world will be able to see who really owns and controls each and every company in these countries,” Cameron said. Six more countries—Australia, Georgia, Indonesia, Ireland, New Zealand, and Norway—said they will explore similar arrangements.

Additionally, 40 jurisdictions have agreed to automatically share beneficial ownership registries with other countries. “This means that law enforcement agencies across the world will be able to access this data—in many cases for the first time—and use it to expose the corrupt,” Cameron said.

Whether it’s possible to have greater access to such information in some of these countries is another story. Take Nigeria as an example. Currently, access to information about registered companies in Nigeria is only possible through the use of individuals accredited by the Corporate Affairs Commission, the body responsible for regulating the formation of companies in Nigeria.

“Individuals seeking to register companies in Nigeria must provide proof of identity, such as copies of passports. However, corporations may also register companies, and proof of the incorporation of a company will not disclose its beneficial ownership,” wrote Babajide Ogundipe, Nigeria’s representative for ICC FraudNet, a worldwide network specializing in asset tracking and recovery. “Presently most registers will record the information provided to it without much detailed checking to confirm the accuracy of such information.”

These announcements may be welcome news for companies that operate either in countries considered to be tax havens, or in countries that traditionally have been difficult to operate in due to local cultures and norms. However, if beneficial ownership registries do become public in such countries, then the announcements to come from the summit ultimately may make it easier for companies to operate in those jurisdictions.

The flips side, however, is the extent to which greater transparency would increase disclosure burdens on companies, says Alistair Maughan, co-managing partner in the London office of law firm Morrison & Foerster. If all regulators get on board, however, it might change some of the cultural norms. “The long-term aim is that it reduces the opportunity for graft and corruption in these countries,” he said.

Individual accountability

Also at the summit, the United Kingdom announced the creation of the first ever International Anti-Corruption Coordination Center, in partnership with the United States, Canada, Australia, New Zealand, Germany, Switzerland, and Interpol. The National Crime Agency and others will provide international coordination and support to help law enforcement agencies and prosecutors work together across borders to investigate and prosecute perpetrators of corruption and recover stolen assets.

During the Summit, U.K. Prime Minister David Cameron announced the intent to extend “failure-to-prevent” offenses beyond bribery and tax evasion to include economic crimes. “Here in Britain we will consult on extending that criminal offence of tax evasion, to other economic crimes such as fraud and money laundering, and we hope others will follow,” Cameron said. “We want firms properly held to account for any criminal activity within them.”

Depending on what the concept economic crimes will encompass, this novel offense is anticipated to aid the successful prosecution of corporations for their failure to prevent employees, agents, and other persons associated with the organization from engaging in or facilitating corporate criminal conduct—such as money-laundering, fraud, forgery, and false accounting—on behalf of the corporation,” Willem Janse van Rensburg, a director in the dispute resolution department at South African law firm Cliffe Dekker Hofmeyr, said.

The proposed extension of strict liability to economic crimes will probably also find favor with legislatures in other jurisdictions. “Corporations are, therefore, advised to take heed as this bold initiative could set the stage for a new and higher international standard in fighting economic crime in general,” Janse van Rensburg said.

The Ministry of Justice in a statement said it, too, will consult on plans to extend the scope of the criminal offence of a corporate “failing to prevent” beyond bribery and tax evasion to other economic crimes. Law enforcement agencies struggle to prosecute companies for money laundering, false accounting, and fraud under existing common laws, the agency said.

“The government is finding new ways to tackle economic crime, and we are taking a rigorous and robust approach to corporations that fail to prevent bribery or allow the tax evasion on their behalf,” Justice Minister Dominic Raab said. “We now want to carefully consider whether the evidence justifies any further extension of this model to other areas of economic crime, so that large corporations are properly held to account.”

Open contracting

Open contracting was another major focus of the summit: To reduce the risk of corruption in the public contracting process, several countries have committed to using open contracting in their government procurement.

These countries include Afghanistan, Brazil, Columbia, Georgia, Germany, India, Italy, Jordan, Kenya, Malta, New Zealand, Nigeria, Norway, Spain, Switzerland, Tunisia, the United Kingdom, Ukraine, and the United States.

The Open Contracting Partnership (OCP), a group that advocates for transparency in government contracting, lauded the initiative. “Information on public contracts is too often buried in yellowing stacks of papers, deep in the basement of government ministries,” the group said in a statement. “This commitment represents a major change in the rhetoric and practice around government contracts.”

Although this is only the first step in a long road ahead to achieve truly open public contracting, “this is the first time that countries have laid out a concrete vision of accessible, useable data across the entire chain of public contracting, while connecting information across bureaucratic silos,” the OCP stated.

The summit was marked by another milestone, as well, when the United Kingdom announced the creation of the Global Forum for Asset Recovery—the first-ever global forum to step up international efforts to recover stolen assets. The first forum, to be held in the United States next year, will focus on returning assets to Nigeria, Ukraine, Sri Lanka, and Tunisia.

Data integrity

Other measures announced at the summit include a variety of steps aimed at data integrity matters—such as making government data more secure and easier to find and making better use of data assets and collecting more granular data on grant making.

Furthermore, to promote effective governance and accountability mechanisms for the extractives industry, 13 countries said they will work to enhance company disclosure of payments made to government for the sale of natural resources such as oil, gas, and minerals. These countries include Afghanistan, Australia, Georgia, Ghana, Italy, Japan, Mexico, the Netherlands, Nigeria, Norway, Spain, Switzerland, and the United Kingdom.

For companies operating in the extractive industry, they now will need to keep an eye out on what the Department of Energy and Department of Treasury announce in relation to disclosure obligations in the extractive industries sector moving forward.

Other developments

Preceding the summit, world leaders, companies, and civil society convened in London for the “Tackling Corruption Together” conference. Effectively addressing corruption, panelists agreed, requires cooperation between, and among various stakeholders, including companies, government, and law enforcement. “We need mutual trust and respect,” said Sir Michael Rake, chairman of the International Chamber of Commerce.

Companies need to collaborate with not just government, but one another “to highlight specific challenges and work collectively to address them,” said

Charles Bowman, a partner at PwC and chairman of the Audit Quality Forum. Given the right mechanisms and the right safeguards, companies could share a lot of valuable information about the nature of the challenges that they face day-to-day, he said.

Collective action, Bowman added, is another opportunity to tackle corruption, given that companies face common issues across industries and geographies. “Whereas one voice may carry little weight, speaking together will have more impact,” he said.

Where issues are identified, companies must be as transparent as possible—self-reporting where circumstances allow and cooperating with law enforcement—to demonstrate a zero tolerance to corruption and to avoid the erosion of trust, Bowman continued. Increasingly, companies realize that the value of building trust is becoming a competitive advantage, he said.

The global anti-corruption initiatives announced at the summit, together with the publication of the “Global Declaration Against Corruption,” are just the latest developments to put a spotlight on the potentially expanding scope of the U.K. Bribery Act and the U.S. Foreign Corrupt Practices Act. Multinationals are encouraged to closely watch developments in the anti-corruption space as other countries may decide to implement similar initiatives in the coming months and years.