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Why sustainability needs Collective Action – an emerging success story in natural rubber supply chains
A guest interview with Bani Bains, Communications Manager at the Global Platform for Sustainable Natural Rubber GPSNR , for the B20 Collective Action Hub. What does your initiative seek to achieve, and how? At the Global Platform for Sustainable Natural Rubber, of which the Basel Institute on Governance is an NGO member, stakeholders representing all parts of the natural rubber industry come together to find common ground over a similar concern: making their diverse supply chains more sustainable, equitable and fair. This is not a straightforward process. Supply chains are like living, breathing organisms – working in complicated, intricate ways to remain high functioning and deliver quality products. And while the heart and the brain may not always see eye-to-eye, one cannot do its job without the other. So building consensus takes time, effort and intent across various stakeholder categories – which is why the Collective Action approach is so vital. We hope our story so far demonstrates that investing time and effort in Collective Action brings positive results for all involved. How do you go about bringing the natural rubber sector together? Few people know that six million smallholder farmers produce almost 90 percent of the world’s natural rubber. These are typically based in South-East Asia, with Thailand, Indonesia, Vietnam and Malaysia being the biggest producers. Other parts of the world – like India, Sri Lanka, Brazil and Côte d’Ivoire – also produce the commodity. In brief, 70 percent of the total rubber produced goes to the tyre industry, which then services other downstream users. Additionally, both producers and processors play a big part in ensuring that the rubber is in the form that is best suited for the various end products. Our aim at the GPSNR is to operationalise something that is truly multistakeholder and represents everyone in the supply chain in our joint efforts to drive sustainability and equity. GPSNR is therefore governed by its members’ General Assembly and by an elected executive committee. The executive committee comprises 15 members representing the five membership categories with voting rights. Day-to-day operations are handled by a secretariat headquartered in Singapore, hosted by the World Business Council for Sustainable Development. Members participate in GPSNR’s work through working groups. What are some key successes so far? In about three years of its existence, GPSNR has over 200 members, representing more than 50 percent of global natural rubber demand. All member companies are required to align their natural rubber procurement policies with a robust policy framework. We see it as a success in itself that so many diverse representatives from different parts of the supply chain are voluntarily signing up and committing themselves publicly to robust standards. They see the benefits of collaborating with industry peers and riding the wave of change to stay ahead of both industry and civil society’s expectations on sustainability. ZSL, a member that represents the civil society category at GPSNR executive committee, conveys why they participate so actively in this LinkedIn article. Last year, members also agreed on a set of reporting requirements and will start the reporting process soon. This will create one core standard for reporting on sustainability data across the industry. This year, the platform recently approved a shared responsibility framework that ensures that the costs of negative externalities are distributed equitably across the value chain. This approach brings the entire industry closer to addressing inequity in a systemic, long-term approach, with well-defined goals and milestones. How do you go about building consensus? All of these tangible successes, and several others to come, are possible only with some intangible ones: successes that happen when opposing sides find common ground, or when different categories of stakeholders can trust and empathise with each other fully. This trust comes through a process of deliberations and debates and is not free of challenges – at GPSNR, we work at this every single day. It requires commitment across members, but most importantly, it requires the space to disagree and voice opinions freely. This space for disagreement as a means to find collaborative solutions is the greatest strength of GPSNR. True to the concept of Collective Action, it makes our initiative truly multi-stakeholder and inclusive. Are there any downsides to the approach? Our focus on deliberation and collaboration makes processes slower. Being slow and steady is no bad thing in itself. Rushed attempts to impose top-down standards on a fragmented industry invariably fail. But as members debate the wording of each question in the reporting requirements, for instance, the world is asking bigger questions of the natural rubber industry, like when we will finally be able to feel confident that their cars and tyres use only rubber sourced from a fully sustainable supply chain. The key is to strike a balance between gaining buy-in from all stakeholders and being efficient. What practical actions do you take to build trust between stakeholders? In the aftermath of the pandemic, finding consensus might be slightly easier, especially as stakeholders can meet in person. At trust-building workshops facilitated by the Basel Institute last month, member participants found certainty in the fact that even if they are on opposing sides of the table sometimes, they are all working towards the same goal of sustainability and equity. Since building trust is a vital element of all successful Collective Action initiatives, whether these focus primarily on sustainability or integrity, we look forward to learning from others in the Basel Institute’s wider network. Learn more Find out more about the GPSNR. Explore resources and tools on Collective Action as a way to bring stakeholders together to address shared challenges of corruption and sustainability in business. Learn about the Basel Institute's Green Corruption programme, which applies anti-corruption tools and approaches to problems of sustainability and environmental conservation.
Singapore: strong AML laws, weak enforcement
Singapore demonstrates a strong anti-money laundering and counter financing of terrorism AML/CFT legislative framework but despite this, it shows significant weaknesses in its effective implementation, according to a recent review by the Financial Action Task Force. This latest evaluation of Singapore is under a new evaluation methodology introduced by the FATF in 2012. So far around 20 countries have been evaluated by the international standard setter based on its new approach which moves away from an assessment of technical compliance, such as laws on the books, to the actual effectiveness of the laws. Countries find themselves under more pressure to demonstrate that they actually enforce their laws. Not only is it required to comprehensively understand their money laundering risk exposure towards AML/CFT, but also to have effective anti-money laundering measures in place. Singapore for example received good marks for their AML laws but was rated mediocre overall due to their ineffective measures. Some of the main weaknesses that detract from effectiveness according to the FATF report include: Singapore is vulnerable to the misuse by criminals of a range of corporate structures and legal arrangements available in the jurisdiction i.e. offshore companies and trusts . The FATF criticised that Singapore should enhance its understanding of the risks associated with such structures. Similarly, FATF evaluators found that risk awareness specifically in relation to non-bank financial institutions needs to be improved. Although supervision in the financial sector has been strong, Singapore is inconsistent with its supervision of the non-financial sectors i.e. real estate agents, lawyers and accountants and applying effective sanctions when breaches of the law occur. While Singapore has been pursuing convictions of natural persons individuals , the FATF evaluators criticize that no legal entity has ever been convicted for money laundering. The unwillingness to pursue complex money laundering cases against legal structures undercuts Singapore’s efforts to tackle money laundering The Basel Institute on Governance has been analysing the new FATF reports in order to demonstrate the reality of the money laundering risk in countries undergoing the new assessments. This work is a key element in the Basel AML Index, a tool to risk rate countries for compliance purposes. Based on the new FATF reports, the Basel Institute has issued a comparative analysis illustrating how Singapore fares against other countries evaluated by the FATF on the basis of its new assessment methodology. The results and a comparative table can be viewed in the press release. Singapore, but also other countries such as Austria and Canada, faced more stringent or nuanced criteria and consequently achieved only middling or even poor results. Singapore’s overall result lies in the midfield, despite strong AML laws. Austria and Norway received even worse ratings in terms of effectiveness and find themselves at the bottom of the ranking among the OECD countries. All of these results will be also reflected in the updates of the Basel AML Index and means that for countries that will be reviewed in future by the FATF, the effectiveness of their AML legislation should play a more important role than just checking the box of international standards.
Singapore found to have ineffective measures to fight money laundering, despite strong legislation
Singapore demonstrates a strong anti-money laundering AML legislative framework but shows significant weaknesses in its effective implementation, according to a recent review by the Financial Action Task Force FATF . The Basel Institute on Governance provides a comparative analysis illustrating how Singapore fares/compares against other countries evaluated by the FATF on the basis of its new assessment methodology. See the detailed results and press statement.
Singapore bribery case reveals corruption risks in shipping industry
This piece was originally published by the TRACE International Blog on 8 May 2015. Republished here with permission. Last week’s ed: 28 April 2015 decision by the Chief Justice of Singapore’s Supreme Court entitled Public Prosecutor v Syed Mostofa Romel is important for shipping companies operating in Singapore. The decision regards bribery charges against a local vessel surveyor who on three occasions solicited bribes from ship masters for issuing favorable inspection reports that would allow the ships to enter an oil terminal. Chief Justice Sundaresh Menon disagreed with a district judge that had sentenced the respondent, Syed Mostofa Romel, to a two-month imprisonment and instead argued that given the circumstances the jail time should be extended to at least six months per charge, at least 12 months . Chief Justice Menon’s explanation may be used in future maritime-related bribery cases in Singapore. Singapore’s 1960 Prevention of Corruption Act PCA applies to both the supply and demand side of a bribery transaction including agents, and is punishable by a fine of up to SGD$100,000 or imprisonment up to five years, or both. The PCA does not contain any exceptions for “customary” payments, including facilitation payments. Any person who is suspected of bribery can be arrested and searched without a warrant by the Corrupt Practices Investigation Bureau CPIB . The CPIB can also investigate any bank account or safe deposit box belonging to a suspect of a bribery offence. Given the growing international cooperation in bribery investigations, it is plausible to assume that non-Singapore citizens or residents could be implicated in national investigations with the information being subsequently shared with other national authorities. The decision contains three main takeaway lessons for those operating in the shipping industry. First, punishment for private sector bribery is just as harsh as that for public sector bribery. Chief Justice Menon argues against the presumption of predominantly non-jail sentences in cases of private sector corruption and refers to the PCA’s enforcement practice, according to which the public interest and the gravity of the offence, among other considerations, determine the sentencing decisions. Chief Justice Menon points out that even though the PCA largely focuses on private sector bribery, it also applies to bribery by “private agents, trustees and others in a fiduciary capacity.” In this particular case the vessel surveyor was a private sector agent without any regulatory and oversight functions that could justify the application of a “public service rationale.” Regardless of whether bribery is related to a private or public sector, the severity of the offence due to its potential threat to safety of people and facilities should justify a longer prison term for the offender, argues the chief justice. Second, bribery in port can cause severe safety risks. In the case at hand, the vessel surveyor was supposed to have ensured that the vessels had no high-risk defects before entering the oil terminal. If such defects were identified during the inspection, the vessels would have undergone rectifications before being permitted to enter the terminal. On two occasions, the surveyor exaggerated his findings by indicating some non-existing high-risk defects to elicit bribes–US$3,000 in each incident–from the ship masters in exchange for the accurate inspection reports he should have produced. On a third occasion, which was in reality a sting operation organized by the CPIB, the surveyor attempted to elicit a bribe from a ship master in exchange for a report that would not mention the high-risk defects that the inspection identified. Those defects were intentionally created for the purposes of the sting operation. Chief Justice Menon argues that a bribery incident that allows a vessel with high-risk defects to enter an oil terminal poses a grave threat to both people working in the terminal and the terminal itself, and therefore should be regarded as an aggravating factor in considering the type and degree of punishment. Third, acquiescence to extortion demands are also considered bribes. Even though there is no information available as to whether either or both ship masters were accused of bribery, the main international anti-bribery laws prohibit giving a bribe, unless there is imminent threat of physical harm. In this particular case, it appears that no threat of death or serious bodily injury was present, and therefore both ship masters could safely walk away without making a payment. As the U.S. Congress noted when it enacted the 1977 U.S. Foreign Corrupt Practices Act, the fact that the payment was “first proposed by the recipient… does not alter the corrupt purpose of the part of the person paying the bribe.” Finally, bribery in the maritime industry as a whole—not just in ports – may be regarded as an aggravating factor in sentencing considerations. Chief Justice Menon maintains in his opinion that the maritime industry is a strategic industry in Singapore that accounts for up to 7% of GDP and provides employment to 170,000 people. Since the ramifications of increased corruption perceptions in Singapore’s shipping industry could have significant detrimental effect on the nation’s economy, one can expect that any bribery incidents involving shipping will be strictly punished, including through longer prison terms for offenders. This Singapore bribery case, along with other recent legislative, enforcement, and collective action initiatives in the shipping industry worldwide, strongly suggests that anti-bribery compliance is gaining ground. The most challenging perhaps would be to change long-established attitudes towards bribery in the industry that “things are just done that way.” No longer.
Publications
Working Paper 1: Anti-money laundering: Levelling the playing field
Switzerland is frequently accused of being reluctant to take thorough measures to fight money laundering. Both the Swiss authorities and the banks in Switzerland strongly reject such accusations. We are convinced that our anti-money laundering measures are best market practice.
What are the reasons for these markedly different viewpoints? Can they be explained by conceptual differences? Are the negative statements the result of insufficient knowledge of our legal provisions, or are they simply motivated by the political desire of the respective commentators to divert public attention from the deficient anti-money laundering policies in their own countries?
A comparison of our measures with the most important competing financial centres could help to answer these questions. The SFS Stiftung Finanzplatz Schweiz – a foundation initiated by the foreign banks in Switzerland – commissioned Professor Mark Pieth of the Basel Institute on Governance to conduct a comparative study of anti-money laundering regulations in the UK, the US and Singapore, the three financial centres which closely compete with the Swiss private banking sector. Professor Pieth is a renowned expert in the field and has close contacts with the international experts who also contributed to the project with in-depth country studies.
About this Working Paper
This paper is part of the Basel Institute on Governance Working Paper Series, ISSN: 2624-9650.