Business integrity

To assess the commitment on prosperity, we examined the Business Integrity Initiative, the OECD Working Group on Bribery and the implementation of the OECD Anti-Bribery Convention, the Prosperity Fund and free trade agreements (FTAs).

1. The Business Integrity Initiative

In August 2018, the prime minister announced an initiative to strengthen support to UK companies so that they can operate with integrity in challenging markets. The Business Integrity Initiative (BII) is a joint programme between the Foreign Commonwealth and Development Office (FCDO) and the Department for International Trade (DIT) and designed to provide practical guidance to help companies overcome barriers to doing business in frontier markets. This includes guidance on dealing with requests for bribes and human rights issues in supply chains, with tailored support offered to SMEs. The Business Integrity Initiative is delivering Priority Area 5 – improve the business environment globally – of the UK Anti-Corruption Strategy¹ and specifically delivering objective 5.11 under Goal 3 – Increased investment with integrity by UK companies in challenging overseas markets.

The creation of a new Business Integrity Hub to provide cross-governmental coordination and provide a designated mechanism for companies looking for support on business integrity. According to the government, the hub is now fully staffed, and guidance services are available on compliance, prevention and collective actions for SMEs. While the initiative lacks an official website, a review of the initiative as part of the review of the FCDO I-ACT programme has been recently published.² The review of the pilot has been carried out by internal and external evaluators.

Beginning work on three pilot countries in Kenya,³ Pakistan⁴ and Mexico,⁵ designed to increase the systematised business integrity offer from UK missions.

• Kenya – the Kenya pilot⁶ is delivered through a collaboration between the British Chamber of Commerce of Kenya, the FCDO and the DIT. The initiative tests how the UK government may be best suited to support international businesses venturing into the Kenyan market by addressing integrity challenges, including corruption, bribery and human rights. The structured approach to identifying integrity challenges used workshops, webinars and peer-to-peer interactions to further collaborations between Kenya and international businesses. Specifically, peer-to-peer learning through the creation of a peer-to-peer forum in Kenya was rated as having had high impact. Twenty-five businesses participated and report improved understanding of risks and mitigation measures and being exposed to new business opportunities.⁷ In addition to the above, group training sessions were carried out. These were attended by 250 businesses in Kenya and Pakistan. Participants “demonstrated increased awareness of issues and between 50 and 80 per cent of attendees report their intention to implement measures within their organisation to improve business integrity”.⁷ This pillar was rated as having had medium impact. Three market specific webinars for exporters and investors were carried out in Kenya and Pakistan with between 25 and 80 attendees per webinar. In Kenya, the review reports evidence of improved knowledge of the issues, and improved corporate governance. In addition, they have piloted a Business Integrity Guide, an e-learning module, including a series of short courses (five to ten minutes) on the Kenyan business environment, governance, people and challenges. According to the review of the pilot, the page was viewed 1,584 times in 18 months and 120 businesses registered to the e-learning module as of June 2020. The e-learning module was rated as high impact, and some of the users have reported their intention to use the material for internal training purposes, including one user that has already mandated this training material for their staff.⁷ Finally, 27 companies in Kenya have been registered into white lists/integrity index, so have undergone vetting and screening processes.⁷
• Mexico – the Mexico pilot, Integridad Corporativa,⁸ is delivered through a collaboration between UNDP, the British Embassy in Mexico, the FCDO and DIT. The project goal is to strengthen SMEs to identify and curb corruption risks in Mexico. This pilot has a number of outputs,⁹ such as a corporate integrity virtual course and guidance to SMEs on whistleblowing protection, guidance on creating a policy for receiving gifts, hospitality and donations, and establishing a code of ethics. According to the latest review, the web pages were accessed 1,750 times.⁷
• Pakistan – in Pakistan, the initiative is delivered through a collaboration between the British Deputy High Commission of Karachi, DFID and FCO (now FCDO) and DIT.

In addition, practical information on integrity considerations when doing business overseas is available on great.gov.uk, DIT’s digital platform. According to the UK Anti-Corruption Strategy updates,¹ DFID, DIT, FCO, UK Export Finance (UKEF) and Serious Fraud Office (SFO) have also improved the language on their respective websites to be more coherent and to emphasise the benefits of business integrity, as well as the risks of corruption.

In 2019, three more actions were taken to further implement the BII. Firstly, an awareness raising campaign was launched to offer the Business Integrity Consultancy Service,¹⁰ which provides five days of tailored, match-funded guidance for SMEs from a consultant specialised in anti-corruption and the protection of human rights when trading with developing and emerging markets. According to the latest review of the pilot, 14 UK businesses have applied for the service, and 7 or 8 out of these rated the service as good or excellent.² All of them report having made changes in the form of designing an ethical sourcing system or an anti-bribery policy, yet it is not clear at this stage what the impact has been on commercial advantage or disadvantage.² Nevertheless, as noted in the 2020 review, “the BII is not on track to meet its end of programme target of 70 SMEs as the Hub only received 14 applications to its consultancy service”.² Secondly, a collective action challenge fund¹¹ was created to support business-focused collective action initiatives to reduce corruption and promote human rights, and improve the investment climate in emerging markets and developing countries. The fund was allocated £250,000 to be distributed to three projects running for 12 months from December 2019. According to the latest review, the fund has supported businesses in Uganda, Ghana and Kenya. The interim results show that CoST Uganda reports that 122 public infrastructure projects with value of over US$34 million were disclosed in line with infrastructure Data Standards and Open Contracting for Infrastructure Data Standards, while 125 more private sector organisations are demanding reforms on fair business practices. In Kenya and Ghana, the fund supported the Institute of Business Ethics that reports 86 companies were trained on supply chain ethics and compliance framework.² Finally, according to the UK Anti-Corruption Strategy year 2 update, the BII was supported by the creation of an expert panel co-chaired by the PM’s anti-corruption champion and the director of the Institute of Export.¹ The panel is intended to represent a cross-section of professionals from the government, private sector and third sector, and ensures the BII remains relevant to business needs.

The three country projects and hub were pilot projects, and the funding was limited. Currently, it is not clear what the impact of the hub and the respective country projects have been, whether the number of businesses trading with these partners has increased, whether they have set up the anti-corruption measures advised and how many (if any) businesses have taken advantage of the consultancy and/or of the collective action fund. The fund and consultancy services webpages are no longer available online. A call for a consultant to monitor and evaluate the pilot in Pakistan¹² was disseminated, yet findings have not been published. The BII is part of the I-ACT programme, and information can also be accessed by visiting the project’s page on the Dev Tracker¹³ to download the reports; however, the information in the annual reviews section does not add much to what is already mentioned in this document.

2. OECD Anti-Bribery Convention

As noted in the latest version of the Exporting Corruption Report,¹⁴ UK assessment from pp. 117 to 120 in the period 2016-2019, the United Kingdom opened 36 investigations, commenced six cases and concluded 12 cases with sanctions. In May 2018, the House of Lords’ scrutiny committee reviewed implementation of the Bribery Act 2010 and published its report in March 2019.¹⁵ It counselled against legalising facilitation payments and reserved judgement on whether there was merit in introducing vicarious liability for bribery offences.¹⁶ (See also the points mentioned below.) In May 2019, the UK government published its response to the report, which welcomed the committee’s work and noted many of its recommendations for change.¹⁷ In 2018, the National Economic Crime Centre (NECC) was established within the National Crime Agency (NCA) to coordinate the UK response to economic crime, including the strategic oversight of bribery cases. The NECC contains officers or representatives from seven key law enforcement agencies and government departments.¹⁸ The International Anti-Corruption Coordination Centre (IACCC) – an international initiative launched in July 2017 and hosted by the NCA – has reported on progress in nine grand corruption cases and the identification of 227 suspicious bank accounts across 15 different jurisdictions.¹⁹

The SFO publishes statistics on opened investigations, cases commenced and cases concluded in its annual report.²⁰ Scotland’s procurator fiscal publishes separate statistics on bribery cases and enforcement.²¹ UK authorities do not routinely publish mutual legal assistance (MLA) statistics, except in response to freedom of information requests.²² In such cases, the data released covers all MLA requests, not only those regarding foreign bribery. The UK Central Authority was due to introduce a new case management system in April 2019, which should allow for more accurate measurement of the time taken to respond to foreign bribery related MLA requests.²³ See the Transparency International Exporting Corruption 2020 report for more detail.

The UK is part of the OECD Working Group on Bribery (WGB), which involves periodic reviews of participants’ progress against the group’s recommendations for change.²⁴ In their latest report on the UK, published in 2019,²⁴ the working group reported that the UK has fully implemented 16 recommendations, partially implemented 18 recommendations, and not implemented 10 recommendations. Most notably, the UK is yet to implement the working group’s recommendation on ensuring the independence of bribery investigations by law enforcement agencies.²⁵ The OECD working group states that the UK has addressed a number of key Phase 4 recommendations, notably asserting the SFO’s continued role as an investigator and prosecutor of foreign bribery cases, generally enhancing the capacity for the enforcement of foreign bribery and related offences, as well as better engagement with the private sector. The OECD WGB has also commended the SFO for “exemplary” publishing of information about concluded foreign bribery cases on its website.

As mentioned in the Transparency International Exporting Corruption 2020 report, there are still a number of inadequacies in the legal framework and in the enforcement system. For example, while the Bribery Act 2010 continues to provide a sound legal basis for prosecuting foreign bribery by both natural and legal persons, we have identified two legal aspects that could be improved. The defence of adequate procedures has only been tested recently by the courts and is still largely defined by guidance;²⁶ and a longstanding issue regarding corporate liability in the UK²⁷ inhibits the successful prosecution of large multi-nationals for substantive bribery offences.  Moreover, the core purpose of the deferred prosecution agreement (DPA) regime is to incentivise the exposure and self-reporting of corporate wrongdoing. The failure to differentiate penalty discounts for those companies that self-report and cooperate and those that only start cooperating once under investigation seriously reduces the incentive for companies to self-report their wrongdoing in the first place, calling into question the use of DPAs. The UK has not yet complied with the fifth EU anti-money laundering directive requirement that the details of trust beneficiaries be made available to those with a “legitimate interest” – a term disputed between civil society and the government.²⁸

3. Trade Agreements: With its exit from the EU, the UK is in the process of negotiating a number of free trade agreements. The UK is prioritising agreements with the EU, Australia, the United States, New Zealand and Japan.²⁹ The UK government has conducted consultations with various stakeholders to inform the agreements and negotiations. The government has also established the Strategic Trade Advisory Group,³⁰ chaired by the Ministry of Trade Policy at the Department for International Trade (DIT). The group was created with the intention of facilitating dialogue with a number of stakeholders; it meets quarterly and it publishes summaries of meeting discussions.³¹ Summaries of two discussions have been published so far, and they include also a list of attendees, although the minutes are quite generic, and it appears as if the inclusion of anti-corruption and transparency measures were not discussed. The Ministry of Trade’s statement to the UK Parliament setting out the UK’s priority in negotiating new trade agreements included two points related to anti-corruption measures.³²

Sustainability

The government will maintain and seek to advance the UK’s world-leading environmental, labour and anti-corruption standards, including to support domestic climate ambition and UK low carbon industries, technology and innovation.

Government procurement

To maximise access for UK companies to government procurement opportunities at US federal and state level, the UK will seek additional market access outcomes that go beyond the level set in the World Trade Organization Agreement on Government Procurement.

 In the UK-US trade negotiations, anti-corruption is listed as one of the areas that was discussed;³³ however, the final text of the agreements is not yet available, which makes it hard to assess the robustness of the measures that will be included.³⁴

In the UK-Australia trade negotiations, one of Australia’s objectives is to establish best practice, standard-setting approaches to transparency and anti-corruption that support the rules-based international trading system.³⁵ Similarly, anti-corruption and transparency are also part of the UK’s strategic approach in negotiating this agreement.³⁶ In addition, many NGOs and private sector stakeholders mention transparency in general and in public procurement in particular as priorities.³⁷ Yet, as the final text is not yet public, it is difficult to understand whether the provisions included will be satisfactory. The current draft wording available includes the following provisions:

Transparency

Ensure world class levels of transparency between the UK and Australia, particularly with regards to the publication of measures (such as laws and regulations) affecting trade and investment, public consultation and the right of appropriate review of these measures.

Commit, subject to the UK’s compliance with its data protection legislation, to prompt and open information sharing between the UK and Australia by setting up regular data sharing to support understanding of the usage and effectiveness of the agreement.

Anti-corruption

Secure provisions that address the trade-distorting effects of corruption on global trade and fair competition to help maintain the UK’s high standards in this area.

Ensure appropriate mechanisms for the implementation, monitoring and dispute resolution of anti-corruption provisions.³⁷

 The same paragraphs are also included in the UK-New Zealand trade negotiations strategic approach.³⁸ The public consultations for the UK-New Zealand trade agreement make many mentions of transparency and parliamentary scrutiny, and there is also a specific mention from the business community on the need to include anti-corruption, bribery and fraud measures.³⁹ There is now an ongoing call for evidence on the UK-New Zealand trade negotiations.⁴⁰ Yet, as the final text is not public, it is unknown whether the provisions included will satisfactorily respect the results of the consultation.

The UK-Japan trade agreement is the first major post-Brexit trade deal secured by the UK. Anti-Corruption is mentioned here as follows:

Article 17.9 –  Anti-Corruption

The Parties affirm their resolve to eliminate bribery and corruption in international trade and investment. Recognising the need to build integrity within both the public and private sectors and that each sector has complementary responsibilities in this regard, the Parties affirm their adherence to the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, done at Paris on 17 December 1997, and the United Nations Convention against Corruption, adopted at New York on 31 October 2003.⁴¹

It is still too early to say how effective the full breadth of trade agreements negotiated by the UK will be in tackling corruption.

4. Prosperity Fund:

As noted in the year 2 update of the UK Anti-Corruption Strategy, the Prosperity Fund Global Anti-Corruption Programme (GACP) is deploying £45m over five years (2017-2022) to promote inclusive sustainable growth and increase global prosperity through tackling corruption. The Prosperity Fund uses overseas development aid funds, and it is delivered by the Foreign, Commonwealth & Development Office (FCDO).⁴² The programme consists of nine projects delivered bilaterally, regionally and globally. The bilateral investment, which is 30 per cent of the budget, is allocated to five out of the 12 Prosperity Fund priority countries; Colombia,⁴³ Indonesia, Malaysia, Mexico⁴⁴ and South Africa. It is made up of nine inter-connected projects that will help target countries and regions to:

• invest in introducing new policies, laws and regulations as well as strengthening existing ones
• increase transparency across the public sector, on beneficial ownership and procurement systems
• strengthen the ability to investigate and recover stolen assets, raise awareness of the causes and impacts of corruption, including upon gender and inclusion
• identify, apply and disseminate good practice approaches¹

The programme directly delivers on a number of strategy commitments and commitments made at the 2016 London Anti-Corruption Summit.¹ From the last annual review in November 2019 eight of the nine projects in the programme have been mobilised and are delivering outputs, and one is being scoped. The Mexico programme was scored with an A in the annual review, and the programme has a strand on anti-corruption and the rule of law.⁴⁴ The Colombia programme received £25.5 million over five years, and the annual review 2019-2020 scored the programme with an A; however, this does not have a strand dedicated to anti-corruption.⁴³ Further information is also available when searching the Prosperity Fund in the DevTracker.⁴⁵

Challenges to effective commitment implementation
Prosperity fund – an overriding risk to the successful delivery of the programme and the main determining factor in achieving the intended outcomes and impact is the political will of the partner governments to implement reform, address corruption, repatriate stolen assets and charge those that have embezzled state funds.⁴⁶ The programme’s approach is sufficiently aware of this, but will need to be kept under continuous review. Another challenge is that the information is scattered and not easily retrieved, so it is often difficult to understand the annual progress and impact.

Opportunities to accelerate commitment implementation
Business Integrity Initiative – The BII should increase on marketing and engagement activities, identifying where SMEs go to find information and ensuring that government information sources for SMEs provide the guidance they need. Additionally, it is critical to expand private sector engagement through peer-to-peer learning opportunities and networks.

Prosperity fund – as identified in the 2019 annual review,⁴⁶ there are opportunities to implement lessons learned. This includes recommendations for realising and better capitalising on synergies across Prosperity Fund projects, between projects in the GACP, within countries of operation, and across the Prosperity Fund’s bilateral and thematic programmes. With a varied and complex programme, this will be an ongoing challenge, but there are specific examples from projects such as the OECD, GDS, BenOwn and UNODC, which should be addressed.

Trade agreements – overseas markets where corruption is endemic are challenging operational environments for British businesses. When contracts are routinely won through nepotism and bribery, corruption in any country’s public sector closes those markets to law-abiding British firms, becoming a barrier to shared prosperity through trade.

Research shows that corruption is detrimental to international trade and business.⁴⁷ The PwC Global Economic Crime Survey 2020 has found that 39 per cent of UK respondents lost an opportunity to a competitor who they believed paid a bribe.⁴⁸ Transparency International’s Exporting Corruption report shows that, of the world’s 47 leading global exporters, 34 countries have limited, little or no anti-bribery enforcement.⁴⁹ As Britain embarks on a new chapter as an independent trading nation, the government should promote adherence to the OECD Anti-Bribery Convention with trading partners. This is not merely a normative argument, the evidence shows that corruption is bad for business.⁵⁰ Indeed, HM Government has recently made the case that a reduction in global corruption, combined with lower barriers for business and stronger corruption penalties can “improve the business environment, improve investment in public services and enhance UK soft power”.⁵¹

Being able to design new trade agreements with a number of partners is an opportunity for the UK to include new, innovative anti-corruption requirements that could improve its reputation as a trading partner and take on a leading role in anti-corruption worldwide. In UK government consultations, many stakeholders mention the need to align and adhere to the WTO transparency standards; however, “the global trade system overseen by the WTO regime has limited purview over so-called ‘deep provisions’ in trade agreements, such as governance issues”.⁵² There are more and better ways to include anti-corruption measures via trade agreements, which we will mention in the recommendations section.

Recommendations
Anti-bribery recommendations – our main recommendations are as follows, also to be found in the Exporting Corruption Report 2020: ⁵³

• Publish court sentencing remarks and judgements for cases of economic crime, including bribery.
• Task the Law Commission to review the UK’s outdated and inadequate corporate liability laws on a priority basis.
• Broaden corporate criminal liability beyond failure to prevent foreign bribery and tax evasion.
• Provide greater support and education on the UK Bribery Act for small and medium-sized enterprises.
• Ensure that DPAs are used only in cases of strong public interest, with utmost transparency, and as a means to encourage self-reporting by others in the future.
• Ensure the NCA, Crown Prosecution Service and SFO principles for compensation of victims are incorporated into the use of DPAs.
• Strengthen mechanisms to determine whether companies convicted of bribery should be debarred from public contracts.
• Ensure that the SFO’s role as the principal actor for enforcing foreign bribery offences is maintained and consolidated.
• Continue to support the timely introduction of public beneficial ownership registers in the UK’s Overseas Territories and Crown Dependencies.
• Closely monitor the impact of Brexit on the UK’s foreign bribery enforcement, particularly in relation to international cooperation arrangements with EU countries.

Prosperity fund: the 2019 annual review identified a number of recommendations to be achieved by March and April 2020,⁵⁴ such as revising and updating the theory of change and the value for money of each project. However, it is not possible to address whether these have been taken on board and implemented as the information is not public at the time of this monitoring exercise. The fund should take on board the recommendations from the external evaluation/annual review, and also increase transparency to ensure that the information is available more regularly and to a wider audience.

International trade agreements: to build prosperity at home and abroad, Britain’s trade policies should seek to level the playing field for law-abiding businesses by raising anti-corruption standards globally. To do so, the government should:

• Ensure their trade partners are also held to the same international anti-corruption standards. The UK can hold their partners to these standards by requiring them to ratify international anti-corruption conventions to secure trade deals. For example, provisions could require state parties to ratify the United Nations Convention against Corruption (UNCAC) and the Organisation for Economic Co-operation and Development’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Anti-Bribery Convention).
• Ensure that their trade partners address corruption in their own jurisdictions and in international forums. State partners should be required to adopt or maintain legislation that criminalises corruption, ensures appropriate penalties, and encourages whistleblower protection. For example, we recommend that the UK leverages its influence to secure open contracting initiatives that level the playing the field for law-abiding businesses to win contracts.
• Enshrine anti-corruption and transparency provisions into new free trade agreements. Britain should seek to raise and promote best practices globally in its new free trade agreements by including specific anti-corruption provisions. This will support law-abiding British businesses trading in new markets and would follow best practice in key existing free trade agreements, such as the Trans-Pacific Partnership⁵⁵
• Require procurement transparency from private and state partners, in line with the Open Business Principles for private procurement transparency.⁵⁶