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Bribery and corruption

Bribery =Offering/Giving/Receiving/Soliciting of any item of value to influence the actions of an official/person in charge of a public or legal duty.

The purpose of bribery is to influence the conduct of recipient =is a form of corruption

Corruption=deviation from honest behavior. Forms of corruption: -abuse of a system:=using a system for improper purposes -bid rigging=promising a contract in advance to one party, although other parties have been invited to bid for the contract -cartel=a secret agreement by supposedly competing producers to fix, prices quantity or market share -influence peddling=using personal influence in government /connections with persons in authority to obtain favors/preferential treatment to another, usually in return for payment. Uk Guidance is based on 6 principles: Proportionate procedures-measures taken should be proportional to risks and nature, size and complexity Top level commitment- top management should be committed to prevent bribery and promoting a culture where bribery is viewed as unacceptable Risk assessment the organization should assess the nature and extent of their exposure to bribery internally and externally. Some activities such as extraction and some markets where there is no anti bribery legislation may be higher risk Due diligence-the organization should perform due diligence procedures in relation to those who perform services for it, or on its behalf

Communication Communication bribery prevention policies and procedures should be embedded and understood throughout the organization through communication and training Monitoring and review -the organization should monitor and review anti bribery procedures and improve them as required

WHY BRIBERY AND CORRUPTION ARE PROBLEMS? -Lack of honesty and good faith Corruption means that someone in a position of authority/responsibility will no longer be acting impartially Bribery encourages others to violate a duty of service -Conflicts of interests Those taking bribes will face a conflict between their legitimate duties and responsibilities and any personal gains they may make through unethical activities Ex: involvement by directors in bid rigging for example may generate higher profits which in turn may enhance their performance bonuses. -International risk management -in some parts of the world , the organizations are under pressure to pay facilitation payments to foreign officials to promote thei business ends. The Companies should probably decide to avoid these paces. -Economic issues -results in a misallocation of funds. Ex: contracts do not go to the most efficient producer but the producer that pays the highest bribe -bribery and corruption threaten the operatins of the market Professional reputation

-if accountants are found guilty of bribery , this can have an adverse impact on the reputation of the profession as a whole, giving the impression of dishonesty and lack of objectivity.

MEASURES TO COMBAT BRIBERY AND CORRUPTION Recent legislation in certain countries has put pressure on businesses to introduce sufficient controls. -under UK Bribery Act if an employee or associate bribes another person, organization will be liable if it cannot show it had adequate procedures in place to prevent bribes being paid. -the organization must demonstrate that its anti-corruption procedures are sufficient to stop any employees acting on the companys behalf from committing bribery.

Establishing culture o Directors may seek to establish a commitment against corruption by a formal statement setting out a ZERO TOLERANCE POLICY o The statement should include an assertion of the benefits of avoidance of corrupt activity(maintaining good reputation and partners confidence). o The commitment of the management against corruption should be reinforced by involvement of the management in the development+implementation of bribery prevention procedures. o Communication of the organisations procedures and policies +training in their application important to establish the culture o A culture that is not enforced may adversely affect the other measures in combating corruption

Code of Conduct - =most important tool of communication with the employyes - -might contain provisions about dealing truthfully with suppliers and refraining from participating in questionable behavior to secure competitive advantage - -it might be decided to issue a separate anti berbery code - -can be enforced by training Risk assessment - Identification of circumstances where bribery may be a problem must be built into business risk assessments: - Sensitive areas: activities of intermediaries/agents/staff within the organization responsible for hospitality /promotional expenditure - Areas where te risk of bribery and corruption may be high:

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Country Countries with high level of corruption, lacking anti berbery legislation(anti money laundering legislation, legislation which fail to promote transparent procurement and investment policies Sectoral -higher risk sectors include extractive+large scale infrastructure sectors Transaction Risky transactions: charitable and political contributions, licences and permits and transactions relating to public procurement Business opportunity High value projects, projects involving many contractors or intermediaries Business partnership risk Joint venture partners and relationships with politically exposed persons Lack of clear anti bribery message from top level management Cultures that rewards excessive risk taking

a poor internal control environment may also contribute to high risk

Conduct of business Ethical code may be undermined by a lack of detailed guidance on the implementation of anti bribery procedures Detailed guidance may be required to include the extent of due diligence on potential business partners or intermediaries Due diligence is both risk assessment and a means of mitigating risks May be used o when contracting for the provision of information services o When an intermediary is selected when establishing business abroad. Procedures may include questioning, investigation or general investigation Procedures will be related to: Procurement and tendering guidance Recruitment and human resource procedures to mitigate the risks that employees in business sensitive areas will become involved in bribery Policies on hospitality and promotional expenditure and charitable and political donations

!!!! Detailed procedures do not give absolute assurance that corrupt activity will not take placer

-staff may misinterpret the requirements, or encounter situations not covered by the guidance.

Reporting of transactions and whistleblowing -the organisations guidance should make it clear that managers and staff should seek guidance +disclose any questionable activities -staff should have the opportunity to make suggestions for improvement of bribery prevention procedures Monitoring Monitoring the system designed to prevent bribery is an important element of the overall monitoring of IC systems Board should receive reports on compliance with internal procedures such as details about questionable behavior that has been discovered.