Accountants are an important part of the arsenal of weapons to be deployed in the battle against global corruption and money laundering, says Errol Oh
This article was first published in the October 2016 China edition of Accounting and Business magazine.
The issue of kleptocracy has popped up frequently in news stories of late, mostly in relation to the efforts of the US Department of Justice Kleptocracy Asset Recovery Initiative, which was set up to forfeit the proceeds of corruption by foreign officials.
The media coverage has again drawn attention to the fight against global corruption and money laundering. The first shot in this long-running battle was fired in 2000, when the UN General Assembly called for an effective international legal instrument against corruption. Five years on, the UN Convention against Corruption came into force.
In his foreword to the document, then UN secretary-general Kofi Annan put things into perspective: ‘Corruption is an insidious plague that has a wide range of corrosive effects on societies. It undermines democracy and the rule of law, leads to violations of human rights, distorts markets, erodes the quality of life and allows organised crime, terrorism and other threats to human security to flourish.’
No country is immune to this ‘evil phenomenon’, he added. But it is clearly at its most destructive in the developing world. In these countries the crooks intercept money that would otherwise be spent on education, healthcare and infrastructure. In addition, corruption discourages foreign aid and investment.
According to the Stolen Asset Recovery Initiative, a partnership between the World Bank and the UN Office on Drugs and Crimes, between US$20bn and US$40bn is siphoned off from developing countries each year.
Much of the loot is the rancid fruit of kleptocracy, defined by the US Federal Bureau of Investigation as ‘a form of political or government corruption involving officials who steal from their government treasuries to enrich their own personal wealth’.
And where there is corruption, there is often money laundering, which is why the Convention against Corruption incorporates measures to prevent money laundering. It also acknowledges the role of accountants in curbing corruption. Accounting and auditing standards, for example, are regarded as safeguards against corruption.
In addressing the private sector, the convention advocates the development of codes of conduct for ‘all relevant professions’. It also urges governments to ensure that private enterprises have robust internal auditing controls to help prevent and detect corruption and that their financial statements are subject to appropriate auditing and certification procedures.
The Financial Action Task Force also recognises a gatekeeper role for accountants. An intergovernmental body that combats money laundering, terrorist financing and other related threats to the integrity of the international financial system, it has recommended that in some situations, accountants should comply with requirements covering customer due diligence, record keeping and reporting of suspicious transactions.
In large-scale corruption, the thieves typically misuse companies to mask the origins of stolen assets and their interests in those assets. Unwittingly or otherwise, many service providers, including accountants, support such deception.
The recovery of the gains of corruption is a powerful weapon. Here, the expertise of forensic accountants and certified fraud examiners is often needed.
As long as there is avarice, the war against corruption will never end. Those on the battlefields, including accountants, must choose sides. It is always good, of course, to be on the side of the righteous.
Errol Oh is executive editor of The Star