BSCI Conference - Tackling Bribery and Corruption Risks-02
Transcript of BSCI Conference - Tackling Bribery and Corruption Risks-02
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Tackling Bribery and Corruption Risks in Global Supply Chains
Frederick Pang
Senior Manager – Audit, South China
Intertek Testing Services
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THE IMPORTANCE:(1) TO DEFINE THE SCOPE(2) TO FORMULATE THE ANTI-BRIBERY STRATEGY
First Question – What is Bribery
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What is Bribery?
• The origin of Bribery – Improper Performance• Citation: Bribery Act 2010, The UK
• s.1 - A person (“P”) is guilty of an offence if either of the following cases applies.
• s.1(2)(a) – P offers, promises or gives a financial or other advantage to another person, and
• s.1(2)(b) – P intends the advantage –
• (i) to induce a person to perform improperly a relevant function or activity, or
• (ii) to reward a person for the improper performance of such a function or activity.
• s.1(3)(a) – P offers, promises or gives a financial or other advantage to another person, and
• s.1(3)(b) – P knows or believes that the acceptance of the advantage would itself constitute the improper performance of a relevant function or activity
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What is Bribery? (Cont’d)
• s.2(1) – A person (“R”) is guilty of an offence if any of the following cases applies.
• s.2(2) – Case 3 is where R requests, agrees to receive or
accepts a financial or other advantage intending that, in consequence, a relevant function or activity should be performed improperly (whether by R or another person).
• s.2(3) – s.2(8) – ‘improper performance’
• s.1(2) & s.1(3) are separate offences
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What is Bribery? (Cont’d)
• The origin of Bribery – Agency Problem• Citation: Prevention of Bribery Ordinance of Hong Kong
• s.9(1) – Any agent who, without lawful authority or reasonable excuse, solicits or accepts any advantage as an inducement to or reward for or otherwise on account of his –
• (a) doing or forbearing to do, or having done or forborne to do, any act in relation to his principal’s affairs or business; or
• (b) showing or forbearing to show, or having shown or forborne to show, favour or disfavour to any person in relation to his principal’s affairs or business,
• shall be guilty of an offence
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What is Bribery? (Cont’d)
• s.9(2) – Any person who, without lawful authority or reasonable excuse, offers any advantage to any agent as an inducement to or reward for or otherwise on account of the agent’s –
• (a) doing or forbearing to do, or having done or forborne to do, any act in relation to his principal’s affairs or business; or
• (b) showing or forbearing to show, or having shown or forborne to show, favour or disfavour to any person in relation to his principal’s affairs or business,
• shall be guilty of an offence
• s.9(1) + s.9(2) = BRIBERY
• Offer and Acceptance; Separate Offences
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BESIDES BRIBERY, CONFLICT OF INTEREST WOULD ALSO JEOPARDIZE IMPARTIALITY
Second Question – What is More?
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Is Conflict of Interest (COI) a kind of Bribery?
• Conflict of Interest – in a position acting on the interest of two conflicting principals
• Bray v Ford (1896) – Lord Herschell – not to be in position where interests and duty conflicts
• Bristol and West BS v Mothew (1998) – Lord Millett – single-minded loyalty
• Hence, COI and Bribery may coincide and overlap, but not necessarily identical
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Possible Corruption in Supply Chain
• Trading/Merchandising• Supplier Evaluation and Selection• Order Placement
• The Testing, Inspection and Certification (TIC) Industry• Audit – • Inspection – • Certification – • Testing –
• Common Feature – Disparity of Power + Agency Problem
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DETECTION AND PREVENTION
The Controls at Intertek
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Identification of Possible Bribe
• Bribe to auditors/inspectors/test operators
• Kick-back or advantages offered in the course of business
• Donations
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Identification of possible Conflict of Interest
• Connection with the industry
• Long term business relationship with clients and auditees
• Undue/Improper influence
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Strategy – Corporate and Company Level
• Structure• An independent team of Legal, Compliance and Risk
Management reporting to the Group
• Audits• Factory Visits
• Unannounced Audits
• Education• Yearly briefing (online) + Quiz
• Bi-monthly meeting on case study
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Strategy – Corporate and Company Level (Cont’d)
• High Policy & Culture – Zero tolerance Policy and Code of Ethics
• Business Ethics
• Walk-the-talk
• http://www.intertek.com/investors/governance/
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Strategy – – Corporate and Company Level (Cont’d)
• Check-and-Balance• Internal Controls – risk, remoteness, verification• Separation of powers – A single report is not solely controlled by
the auditor• Detection of Irregularities and Analysis• Reporting of offer and acceptance by frontline staff
• Transparency & Approval• Clearly defined Authorization Limits• N+1 or N+2 Approval• Declaration of interests (Yearly)
• Objective : to enhance the probability of detecting corruption and COI
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Strategy – Beyond Corporate and Company Level
• Law enforcement • Criminal investigation and prosecution (c.f. civil litigation)• Government policy
• Locus standi• Grant of Leave for litigation
• Open Information• Reference Check in the industry
• Intelligence Sharing
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Strategy – Beyond Corporate and Company Level (Cont’d)
• Collaboration – with other stakeholders in the supply chain• Reporting by informants & Investigation• Culture Building on impartiality and integrity, no offer and no
acceptance; business on condition of quality and value creation
• Objective : to enhance the probability of detecting corruption and COI and the consequence of breaches
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Collaboration & Cooperation
Microscopic
Strategy
Macroscopic
Strategy• Check-and-Balance
• Transparency & Approval
• High Policy & Culture
• Structure
• Audits
• Education
• Law enforcement
• Open Information
• Collaboration
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Valued Quality. Delivered.