February 24, 2020

In November 2018, the Reserve Bank of Australia was mired in controversy. It was disclosed that two of its subsidiaries pleaded guilty in 2011 and 2012 to charges of conspiracy to bribe foreign officials. The details had been suppressed by a court order, which was lifted last year, permitting publication.

Note Printing Australia (NPA), still a fully owned RBA subsidiary, and the then 50 percent owned RBA subsidiary, Securency, manufacturer of the plastic bases used in certain banknotes, were both hit with huge sanctions by Australian authorities.

“NPA paid fines totaling A$450,000 and a pecuniary penalty under the Proceeds of Crime Act 2002 of A$1,856,710. Securency paid fines totaling A$480,000 and a pecuniary penalty under the Proceeds of Crime Act of A$19,809,772,” the RBA said in a statement following revelations of the proceedings.

The RBA claimed that the boards of the companies had no knowledge of the crimes committed by their staff, but it accepted that there were shortcomings in oversight and governance, but alsocommitted to take preventative steps to ensure that similar incidents never again occur.

Bribery, and corruption generally, have more complex ramifications than might immediately be understood. In corporate scandals like this, the victims are not those paying fines on behalf of their dirty subordinates; nor are they the other law-abiding businesses who lose out on competitive bids and opportunities. The victims are citizens of countries: those receiving the bribes were Malaysian and Indonesian officials, in this instance, so it is the economies and the societies of these two nations that are adversely affected.

When bribery takes place, money that should end up being paid in taxes, to benefit every citizen, instead vanishes into the bank accounts of individual corrupt officials. Then business itself in the country is altered as a result of corruption. The normal function of market competition is twisted, with those willing to receive bribes stepping over more competent, honest people who are not. In democracies, freedoms are also diminished, with money becoming the only question as to whether someone is guilty of a crime or deserves exoneration.

In this sense, the mere presence of bribery in an economy makes a country doubly less efficient. Firstly, because with each transaction within that society, money goes missing, and therefore the cost of all services becomes inflated. Secondly, because those operating in businesses and institutions have less pressure placed on them to be proficient in their roles and duties. Fitness becomes a matter of how well you break the law.

It is from this dark picture that Western multinationals avert their eyes, and to which they contribute when they engage in the necessary bribery of corrupt environments. And of course, due to the infectious atmosphere of such illicit markets, companies need to be diligent in inoculating their structures and staff as well. Certainly, given the cost to reputation, RBA does not likely want those under its governance giving bribes, but clearly the safeguards that were in place were insufficient.

What can be done in this regard? There are efforts by companies to take on self-imposed anti-bribery procedures, as the Australian Central Bank suggested it had done. This can take the form of guidelines for staff on accepting gifts, establishing official protocols for tracking relationships and communications with clients and contacts, and encouraging an executive-down, honest culture of practice. Presumably, this is some of what RBA had in mind.

There are a number of systems out there, unfortunately the discontinuity between different companies and countries limits their effectiveness. Additionally, companies can make false statements as part of the reparations required by authorities when they are caught in the act. Promising to impose your own anti-bribery frameworks is perceived to lessen financial penalties, whether a company intends to follow through on such promises is a dimension only learned later on.

Some companies have had enough of the informal world of corrupt agents being self-policed by informal company mechanisms, given that there is little evidence to suggest that such processes are any better than box-ticking exercises. Those who actually want to see ethics change are turning to the International Organisation for Standardisation (ISO) for an impartial contributor who can begin solving the problem.

The biggest name who has stepped up is Microsoft, which put its brand behind ISO 37001 Anti-bribery Management Systems, the ISO’s solution for all players,but especially those like RBA.

The ISO people are experts in creating industry alignment through universal international standards. By establishing itself as the best tool for the job, ISO 37001 could help prevent situations like that with the Australian bankers mentioned above. It has been proven to tackle bribery on the international stage and is gaining traction in the realms of state level contract bids.

Essentially, ISO 37001 is an anti-bribery standard that aides organisations in developing effective bribery and corruption prevention programs, as well as promoting ethical business cultures.

Microsoft’s Judd Hesselroth, programs director in Microsoft’s office of legal compliance has been vocal in his support for the standard.

“It will provide any organization with a global benchmark to evaluate, improve or build its own anti-bribery programme. It will also give confidence to stakeholders (e.g. customers, suppliers, shareholders, etc.) that the organization has met that global benchmark,” Hesselhorth said.

Given the high-risk of bribery in sensitive industries such as banknote printing, it would be encouraging to see those caught up in scandals of the past, as the RBA was, coming to the table and demonstrating their seriousness through the adoption of universal standards. Following an external, international framework is the only way we can be sure that past offenders like this mean what they say.

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Henry Clark