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BSCI Conference - Tackling Bribery and Corruption Risks-02

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Fred Pang
Fred Pang

This document discusses strategies for tackling bribery and corruption risks in global supply chains. It defines bribery and contrasts it with conflict of interest, noting areas of overlap. Potential corruption issues in supply chain management are identified, such as in supplier evaluation, order placement, and testing/inspection. The document outlines Intertek's controls to prevent bribery, including education, audits, separation of duties, and transparency. It also discusses the importance of broader strategies like law enforcement, collaboration with stakeholders, and culture building to reinforce integrity in business transactions.

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www.intertek.com1 Tackling Bribery and Corruption Risks in Global Supply Chains Frederick Pang Senior Manager Audit, South China Intertek Testing Services
www.intertek.com2 THE IMPORTANCE: (1) TO DEFINE THE SCOPE (2) TO FORMULATE THE ANTI-BRIBERY STRATEGY First Question What is Bribery
www.intertek.com3 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
www.intertek.com4 What is Bribery? (Contd) 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
www.intertek.com5 5 What is Bribery? (Contd) 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 principals 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 principals affairs or business, shall be guilty of an offence
www.intertek.com6 What is Bribery? (Contd) 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 agents (a) doing or forbearing to do, or having done or forborne to do, any act in relation to his principals 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 principals affairs or business, shall be guilty of an offence s.9(1) + s.9(2) = BRIBERY Offer and Acceptance; Separate Offences
www.intertek.com7 BESIDES BRIBERY, CONFLICT OF INTEREST WOULD ALSO JEOPARDIZE IMPARTIALITY Second Question What is More?
www.intertek.com8 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
www.intertek.com9 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
www.intertek.com10 DETECTION AND PREVENTION The Controls at Intertek
www.intertek.com11 Identification of Possible Bribe Bribe to auditors/inspectors/test operators Kick-back or advantages offered in the course of business Donations
www.intertek.com12 Identification of possible Conflict of Interest Connection with the industry Long term business relationship with clients and auditees Undue/Improper influence
www.intertek.com13 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
www.intertek.com14 Strategy Corporate and Company Level (Contd) High Policy & Culture Zero tolerance Policy and Code of Ethics Business Ethics Walk-the-talk http://www.intertek.com/investors/governance/
www.intertek.com15 Strategy Corporate and Company Level (Contd) 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
www.intertek.com16 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
www.intertek.com17 Strategy Beyond Corporate and Company Level (Contd) 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
www.intertek.com18 Collaboration & Cooperation Microscopic Strategy Macroscopic Strategy Check-and-Balance Transparency & Approval High Policy & Culture Structure Audits Education Law enforcement Open Information Collaboration
www.intertek.com19 Valued Quality. Delivered.

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BSCI Conference - Tackling Bribery and Corruption Risks-02

  • 1. www.intertek.com1 Tackling Bribery and Corruption Risks in Global Supply Chains Frederick Pang Senior Manager Audit, South China Intertek Testing Services
  • 2. www.intertek.com2 THE IMPORTANCE: (1) TO DEFINE THE SCOPE (2) TO FORMULATE THE ANTI-BRIBERY STRATEGY First Question What is Bribery
  • 3. www.intertek.com3 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
  • 4. www.intertek.com4 What is Bribery? (Contd) 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
  • 5. www.intertek.com5 5 What is Bribery? (Contd) 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 principals 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 principals affairs or business, shall be guilty of an offence
  • 6. www.intertek.com6 What is Bribery? (Contd) 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 agents (a) doing or forbearing to do, or having done or forborne to do, any act in relation to his principals 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 principals affairs or business, shall be guilty of an offence s.9(1) + s.9(2) = BRIBERY Offer and Acceptance; Separate Offences
  • 7. www.intertek.com7 BESIDES BRIBERY, CONFLICT OF INTEREST WOULD ALSO JEOPARDIZE IMPARTIALITY Second Question What is More?
  • 8. www.intertek.com8 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
  • 9. www.intertek.com9 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
  • 11. www.intertek.com11 Identification of Possible Bribe Bribe to auditors/inspectors/test operators Kick-back or advantages offered in the course of business Donations
  • 12. www.intertek.com12 Identification of possible Conflict of Interest Connection with the industry Long term business relationship with clients and auditees Undue/Improper influence
  • 13. www.intertek.com13 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
  • 14. www.intertek.com14 Strategy Corporate and Company Level (Contd) High Policy & Culture Zero tolerance Policy and Code of Ethics Business Ethics Walk-the-talk http://www.intertek.com/investors/governance/
  • 15. www.intertek.com15 Strategy Corporate and Company Level (Contd) 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
  • 16. www.intertek.com16 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
  • 17. www.intertek.com17 Strategy Beyond Corporate and Company Level (Contd) 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
  • 18. www.intertek.com18 Collaboration & Cooperation Microscopic Strategy Macroscopic Strategy Check-and-Balance Transparency & Approval High Policy & Culture Structure Audits Education Law enforcement Open Information Collaboration