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Stop watering down anti-corruption legislation

At a time when governments around the world are speaking out about making the financial system more transparent to stop criminal activity diverting money from government coffers, news that the UK is considering watering down its new Bribery Act, just two years after it became law sends the wrong signal.

In the US both the US Chamber of Commerce, which represents thousands of businesses, and the American Petroleum Institute, have been working overtime to weaken the Dodd-Frank financial reform legislation and the Foreign Corrupt Practices Act (FCPA). Dodd-Frank includes provisions to increase transparency in the financial system and ensure that companies published more information about how and where they do business. The FCPA targets bribery of foreign officials.

Costs v. Benefits

There are legitimate arguments that regulations can impose costs, particularly on small and medium sized business. This is apparently the reason for the UK Bribery Act review – but the issue of too much bureaucracy can easily be hijacked. Companies should not use it as an excuse to allow themselves the leeway to pay bribes or to abrogate their commitments to transparency.

In the UK, the Bribery Act was introduced to counter criticism from the OECD, the group of the world’s leading economies, that the UK did not comply with its Foreign Bribery Convention. The Convention makes it illegal for a company to bribe an official in a foreign country. Public opinion in Britain would be scandalised by an oil company from abroad trying to bribe a UK politician, or a junior government official.

It is too soon to tell how well the UK Bribery Act will work in practice. Businesses, particularly small and medium sized firms, are still coming to grips with what it means. In a recent survey by Ernst & Young, it found that although business with revenues of more than £50 million are aware of the Act, half of the smaller businesses surveyed were not.

So far, there have been few prosecutions. However, this does not mean that its provisions should be prematurely altered. The call should be for enforcement. According to reports, the UK government is considering reviewing the section on ‘facilitation payments’, otherwise known as bribes. No matter what the working definition is: bribes should always be illegal.

A decade of research from the World Bank and others has shown the damage that bribe-paying does to economies. This damage is not just to economic growth, by embedding the power of corrupt elites who prioritise personal enrichment over economic development, but to ordinary citizens.

Anti-bribery and anti-corruption laws are designed to stop this abuse of power. Bribes distort the free market, which cannot be in the long-term interests of a well-run company. Moreover, if a company can only win a contract by breaking national and international law, its board of directors should question whether its executives are operating a sustainable business model, one that will attract customers and investors alike.


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