Access to the financial system helps transform lives around the world, reduce poverty and spur economic development. But the financial system is also used by those involved in some of today's worst crimes that include bribery and corruption.
The term "bribe" can actually be 'anything of value' to induce someone to perform a dishonest or improper act. It may include cash or cash equivalent, gift, entertainment, job offerings, improper donations or sponsorship, offering loans at preferred rate for personal benefit or giving out confidential information to get an undue advantage. "Corruption" probably goes beyond any set definition and would relate to misuse of power or position. Bribery and corruption are predicate offences under Money Laundering Prevention Act, 2012 and subject to penalty by the virtue of the said act.
For example, if adequate due diligence is not done on customers and their source of fund, there is a chance that illegal proceeds received from bribery and corruption will get injected into the financial system. If these illegal proceeds remain undetected, then financial institutions will be at risk of not reporting suspicious transactions to Bangladesh Financial Intelligence Unit (BFIU) which could lead to punitive measures against the financial institutions.
Also, if employees of a financial institution offer, request, or accept improper advantages, which may extend beyond cash, it may also be seen as a bribery and corruption offence, both for the employee and for the employer. Therefore, it is critically important that financial institutions develop adequate controls to monitor and prevent such actions by employees. For example, there should be adequate recording and approval procedure for receiving or giving away of any gift or entertainment before any travel and expense claims are approved by the financial institution.
In addition, bribery and corruption done by third parties, especially intermediaries acting on institution's behalf, is another area which requires close monitoring. Now the question is, how can financial institutions have oversight on the activities of a third party whether they are giving any bribe anywhere to gain any business or advantage? First of all, to protect financial institutions in an adverse legal situation, suitable contractual terms should be there with the third parties including organisation's clear stand on "zero tolerance" to bribery and corruption. Due considerations should be given on implementing controls around vendor payments to ensure the right amount is paid for legitimate services rendered in accordance with contractual terms. Payment claims with category mentioned as "Others Payment", must be scrutinised carefully.
Financial institutions are exposed to bribery and corruption risks to a large extent. With the outbreak of COVID-19, such risk intensifies when organisations come forward to facilitate movement of funds for COVID-19 recovery and make charitable contributions to agencies tasked with COVID-19 relief and recovery.
To win the battle against bribery and corruption, organisations must have policies, systems and measures in place to detect and prevent bribery and corruption. We must also provide the opportunity for the people to be able to speak up and say no to bribery and corruption. Key aspects for an effective control environment to prevent bribery and corruption must include oversight and governance, a risk assessment process, communication and training, review and pre-approval processes, risk rating of and due diligence on third party relationships, confidential reporting, financial controls and record-keeping, and independent testing processes.
These measures shall contribute to building effective institutions towards a culture of integrity and transparency. Technology can play a vital role to ensure transparency with its contributions to automated value chains, e-government systems and others. Also, it is equally important to put in place effective whistle-blower protection to ensure that persons who speak up against wrongdoing are protected from victimisation.
Certainly, the fight against bribery and corruption is not just specific to Bangladesh; this is a global issue. Although bribery and corruption may never go away, fighting it in order to make a difference is possible. In a fluid, ever-changing environment, robust anti-corruption measures and practices are essential to protect reputations and the interests of our stakeholders. Only by working together can one hope to fight this endemic crime and achieve just outcomes for the communities we serve.
The author is Head, Conduct, Financial Crime and Compliance, Bangladesh, Standard Chartered