Compliance
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New book! Explore the impact of anti-corruption Collective Action
“The scope of integrity and anti-corruption Collective Action initiatives has grown massively over the last 20 or so years. This is because companies, civil society and others have recognised that to tackle extortion and the payment of bribes requires more than an inward-looking ethics and compliance programme to ensure fair competition.” Gemma Aiolfi, Senior Advisor, Legal and Compliance, Basel Institute on Governance Over the past two decades, Collective Action has grown from a niche idea to one of the most promising approaches in the global fight against corruption. The concept of sustained multi-stakeholder collaboration is increasingly recognised in international standards, national strategies and corporate practices. We are excited to announce the release of our new book, Collective Action in practice: a game-changer for business integrity , offering an in-depth reflection on this journey. It explores the growing impact it has on promoting business integrity around the world. Collective responses to shared challenges At its core, anti-corruption Collective Action is a simple yet powerful concept: tackling corruption challenges together, rather than alone. The approach brings together diverse stakeholders – primarily businesses, but often also civil society organisations, public sector representatives and/or academic institutions – around common challenges, shared goals and practical solutions. Showcasing real impact Drawing on real-life examples, policy milestones and practical experiences from the Basel Institute on Governance and our partners, Collective Action in practice: a game-changer for business integrity presents how diverse actors have been working together to tackle corruption in complex environments. It aims to capture the living ecosystem of Collective Action as it exists today, its foundations, its progress and the possibilities it continues to offer for the future. The book is structured in three parts: Part 1: Advancing the knowledge base – presents the analytical tools and conceptual models that help us make sense of Collective Action in practice. It showcases the B20 Collective Action Hub as a flagship resource, documenting more than 340 initiatives and providing access to hundreds of publications. Part 1 also introduces a newly developed typology that reflects the evolving forms of Collective Action and their distinct roles in shaping business integrity. It also explores how the anti-corruption field intersects with human rights and sustainable development, offering fresh perspectives on risk, responsibility and collaboration. Part 2: Mainstreaming Collective Action as a norm – illustrates the growing recognition of Collective Action in international standards and policy frameworks. It highlights policy milestones and references in regional and national strategies and legislation. It also showcases the Institute’s International Collective Action Conference series and the Collective Action Awards, which have helped build a common language around Collective Action and inspire action across industries and geographies. Part 3: Providing hands-on support – focuses on the Basel Institute’s direct support to Collective Action practitioners. It highlights the importance of peer learning and the mentoring programme for civil society organisations, which has grown into a global community of practice. These efforts are grounded in our belief that the success of Collective Action depends not only on policies and frameworks, but also on the people driving change on the ground, often with limited resources and in challenging environments. Learn more Access the individual chapters or the complete book for free on our website. Take our free eLearning course on Collective Action Against Corruption. Visit the B20 Collective Action Hub. Collective Action in practice: a game-changer for business integrity was developed and published by the Basel Institute on Governance, with support from the Siemens Integrity Initiative.
Managing conflicts of interest in the EU, South Korea and Brazil – new study
Effectively managing conflicts of interest in the public sector is crucial to mitigate corruption risks. It is also fundamental to building well-functioning institutions and to generating trust in government. How are different states doing this? What models exist? What are the challenges? To answer these questions, our new report analyses conflict of interest legislation and management in three case study contexts: South Korea, Brazil and the European Union. The three case studies share, to varying degrees, democratic regimes, competitive elections and advanced economic performance. At the same time, they differ in the shape of their institutional architecture, spanning a fairly centralised system South Korea , a federal state Brazil and a supranational entity the EU . The study is based on the international standards in the 2020 guide Preventing and Managing Conflicts of Interest in the Public Sector , produced by the World Bank Group, OECD and UNODC at the request of the G20 Anticorruption Working Group. It was prepared under the USAID Indonesia Integrity Initiative USAID INTEGRITAS . We hope it will be valuable to anyone interested in drafting, revising or monitoring conflict of interest legislation in any context. Here are some key takeaways: Similar in principle… Developing mechanisms to manage conflicts of interest is recognised as crucial for good governance in all three contexts – even if building a conflict of interest management system is not per se a guarantee of eradicating it. The three systems are based on a shared idea of what it means to prevent and manage conflicts of interest. Common elements include: mechanisms for reporting financial interests, properties and personal relations; remedial actions for managing conflict of interest situations and administrative and penal sanctions for punishing violations; thresholds and prohibitions for gift giving and hospitality; protocols for managing post-employment terms and revolving doors mechanisms. The level of specificity of the legal framework matters. Higher specificity clarifies what is permitted and not, as well as the consequences for violating the law. However, a very broad, detailed and demanding law might be challenging to enforce in complex bureaucracies. A proper balance needs to be found. …different in practice Despite the underlying similarities, the systems look quite different in each case study context. This happens when international standards enter into contact with the functional, operative and informal characteristics of different social, political, bureaucratic and business environments. Differences in the institutional architectures of the three contexts have also impacted the characteristics of the systems aimed at managing conflict of interest situations. Another difference concerns the origin of legal frameworks on conflicts of interest. For example, South Korea built its conflict of interest infrastructure ex novo after corruption scandals emerged. Meanwhile, Brazil has built its system on top of solutions already developed in the early 1990s for regulating the duties of politicians and bureaucrats. Both of these strategies have pros and cons: Starting from zero allows legislators to build a conflict of interest framework that integrates the most innovative solutions. But there is a need to train public officials to follow the new practices, push against the pressure of doing business as usual, and instil new preferences in the bureaucracy. Building on pre-existing laws and regulations can be a resource-saving strategy. But there is a risk of duplication or overlapping of functions and mandates, as well as legal opacity and unnecessary red tape due to excessive cross-referencing with previous acts or codes. Differences between the contexts are also visible in the harshness of the penal and administrative sanctions. The South Korean model imposes very strong sanctions, such as several years of imprisonment in the most serious cases. Implementation of these penalties also appears to be severe in contrast to the Brazilian and EU models. Implications The findings from the analysis underline how critical it is to build a flexible, adaptive and proactive policy-making approach to regulating these sensitive issues. Policymakers and legislators must also be able to integrate input and feedback from citizens and the business community to continuously update their legal infrastructures. In addition, the analysis reveals: It is not enough to define vague procedures to address situations of conflict of interest; specificity is also necessary. At the same time, adding too many details risks generating issues with implementation of the law for enforcers and investigators. The severity of the sanctions is a critical deterrent and preventive factor, as well as a key support for enforcement and investigative activities. This has to be balanced with respect for the rule of law and human rights. A minimum common ground is helpful for conflict of interest legislation, at least touching all points in the Preventing and Managing Conflicts of Interest in the Public Sector guide. But specific technical solutions need to be tailored to the local context. Incrementally reforming and amending existing frameworks for conflict of interest can result in a fractionalised architecture with mutually incoherent pieces, such as disconnected or duplicative acts, regulations and codes of conduct. It is helpful to try to build the infrastructure around one major piece of legislation and align the rest around it as best as possible. Robust systems and protocols must be in place to handle the complexity of managing conflicts of interest. This needs investment in both institutions and governance capacity, but also functional rationalisation to avoid overly bloating the bureaucracy. A risk-based approach is needed to prioritise the greatest risks of conflict of interest, identify areas that deserve more attention and ease effective implementation of the management system. This means using tools to assess the risks of corruption and conflict of interest along the governance chain. Addressing gaps – campaign financing A key conflict of interest pattern behind grand corruption schemes involves connections between electoral campaign financing by particular business interests and subsequent decisions on the award of valuable public contracts. It is noteworthy that such issues are not adequately covered by the legal and regulatory frameworks described in this report. Very often, data collected on the financing of the electoral campaigns is not used to detect and red-flag suspicious connections between electoral financial flows and the subsequent distribution of public contracts and procurements. Matching data on electoral financing and public procurement procedures with the goal of revealing suspicious situations could contribute to improving the prevention of one of the most pernicious forms of conflict of interest. Legislating more closely how electoral donations must be reported and made transparent would be a step in the direction of addressing some of the most important conflict of interest and, ultimately, corruption risks. Investing in innovation The analysis shows the challenge – and opportunity – to make productive use of the huge amount of data generated by public systems. This includes data on public officials’ financial assets, real estate and social relations, as well as data from land, property or vehicle registers, campaign finance transactions, procurement transparency systems and beneficial ownership registers. Connecting these would be a good start. Going forward, new and better data management solutions are crucial for effective implementation of conflict of interest management systems and other anti-corruption measures. Designing artificial intelligence or machine learning tools to mine data and cross-reference databases to red-flag suspicious connections and exchanges should be in the research agenda going forward. The generation of high-quality and comparable databases is a goal that must be further emphasised.
Basel AML Index launches API for easier integration into compliance and risk management systems
Companies and financial institutions around the world use the Expert Edition of the Basel AML Index to help evaluate money laundering/terrorist financing risks at the country level. Smaller companies tend to use the Basel AML Index as a standalone geographic risk evaluation solution, as the dashboard enables quick access to 17 key indicators of money laundering/terrorist financing risk for 203 jurisdictions. Others apply it as an independent benchmarking tool to validate in-house risk assessments. A new API now makes it easier to integrate Basel AML Index data automatically into in-house compliance and risk evaluation systems. 17 indicators of money laundering risk, sanctions and blacklists The Basel AML Index API application programming interface allows computer systems to request and consume all data available in the Expert Edition in an automated way. The data covers 17 indicators of money laundering and terrorist financing risk, including: Financial Action Task Force: country score based on Mutual Evaluation/Follow Up Reports Tax Justice Network: Financial Secrecy Index Transparency International: Corruption Perceptions Index TRACE: Bribery Risk Matrix Indicators of risks relating to narcotics and human trafficking from the US State Department Other indicators of financial and public transparency and political/legal risks from the World Bank, World Economic Forum and other reliable sources An 18th indicator on environmental crime will be added at the end of September. The Expert Edition also highlights sanctions and other lists relevant to evaluating a country’s money laundering and terrorist financing risk, including those issued by the FATF, UN Security Council, US Office of Foreign Assets Control and European Union. How to get the API The API is available to existing Basel AML Index users for an extra fee, depending on the use case. The API is based on the REST standard and delivers the data in JSON format. Requests will be granted on the basis of an individual API key that is connected to the user’s profile. For more information, please contact index@baselgovernance.org.
Green Corruption programme launches 5-year partnership with USAID Indonesia Integrity Initiative
The Basel Institute's Green Corruption programme has recently launched a five-year partnership with the USAID Indonesia Integrity Initiative USAID INTEGRITAS project in Indonesia. The project is a new, USD 9.9 million USAID initiative implemented by a consortium of NGOs led by KEMITRAAN Partnership for Governance Reform . Other partners include Indonesia Corruption Watch ICW and Transparency International Indonesia TI-Indonesia . USAID and the Basel Institute have cooperated with the Government of Indonesia on combating corruption for over a decade. The Basel Institute's Green Corruption programme Team Leader, Juhani Grossmann, noted: It is a great pleasure to be back in Indonesia, working with a 'dream team' of partners to jointly tackle one of the most complex issues of our times: environmental corruption. KEMITRAAN Executive Director, Laode Muhammad Syarif, said: We are excited about the consortium we have put together for this work, drawing upon our own experience and the work of our outstanding partners ICW and TI-Indonesia on the domestic front, combined with the international expertise of the team at the Basel Institute. We are optimistic about the changes we can achieve over the next five years by bringing our collective expertise to bear, in cooperation with key government institutions involved in corruption prevention efforts. The project will focus on preventing corruption in the environmental field, both in the public and private sectors, through a dual-tracked approach of systems strengthening and public engagement. It seeks to improve transparency, reduce conflicts of interest and promote accountability. The Basel Institute's Collective Action, Public Governance and Green Corruption teams will support the consortium members, the Government of Indonesia and private and state-owned enterprises SOEs . The scope covers improving integrity systems in government agencies and SOEs, developing targeted anti-corruption public education strategies, and supporting private-sector and multi-stakeholder Collective Action efforts in the environmental sector.
New partnership to support anti-corruption compliance certification through Collective Action in Thailand
The Basel Institute on Governance and the Thai Institute of Directors IOD , in conjunction with the Thai Private Sector Collective Action Against Corruption Thai CAC , have today signed a Memorandum of Understanding to jointly support the promotion of anti-corruption compliance. The agreement covers the launch of a pilot project that aims to encourage the local certification of anti-corruption compliance programmes in SMEs, while alleviating the due diligence burden on multi-national companies. The Thai CAC will engage, educate and build the capacity of SMEs around anti-corruption policies and systems, as well as the requirements of multinational companies on transparency and due diligence for their suppliers. The Basel Institute will provide technical assistance with financial support from the KBA-NotaSys Integrity Fund. The Thai CAC is an initiative by the Thai private sector which aims to tackle corruption via Collective Action and aims to bring effective anti-corruption policy and mechanism into implementation by companies in order to create an ecosystem of clean business community. Learn more Find out more about the concept of local compliance certification through Collective Action and how this novel approach is being applied around the world. Visit the B20 Collective Action Hub to learn more about how Collective Action can help to build stronger public-private partnerships in the fight against corruption. Pana Ratanabanangkoon, Project Director of the Thai CAC, spoke about the initiative's work and achievements at an UNGASS 2021 side event co-organised by the Basel Institute's Collective Action team and the Swiss Federal Department of Foreign Affairs. Watch the recording.
Publications
Addressing conflicts of interest and corruption in Indonesia’s energy transition
This U4 Issue analyses Indonesia’s ambitious energy transition and highlights how political finance, weak regulations and a “revolving door” of personnel between public office and the private sector create vulnerabilities. The publication was produced by U4 and the Basel Institute on Governance through its Green Corruption programme.
About the paper
Conflicts of interest and corruption in Indonesia’s political economy pose significant risks to its energy transition, including the Just Energy Transition Partnership. Existing legal and institutional frameworks are fragmented, inconsistently applied, and often fail to address the risk of state capture by powerful political and economic actors, especially in the extractive and energy sectors.
The reliance on fossil fuel industries for political financing and the monopolistic nature of state-owned entities further complicate the shift to a low- or no-carbon system, despite the country’s ambitious renewable energy targets.
Potential pathways to greater anti-corruption resilience lie in improvements to beneficial ownership transparency and strengthening regulation, monitoring and sanctioning of conflict of interest violations.
Collective Action in practice: a game-changer for business integrity
Policy Brief 12: De-risking of Russian clients: best intentions, unintended consequences
After the Russian invasion of Ukraine and the wide-reaching sanctions which ensued, many Western financial institutions began to de-risk Russian clients. Dealing with Russian clients, in many cases, has become expensive from a compliance point of view and toxic from the reputational side.
However, the de-risking of unsanctioned Russian individuals may have a significant impact on the fight against financial crime by potentially causing:
- an increase in the use of shadow/unregulated channels of moving money;
- a withdrawal of funds away from the European zone to sanctioned countries or non-cooperative jurisdictions;
- severe burdens on the investigation of financial crimes (especially in relation to Russian assets and investments) and on international cooperation in criminal matters;
- increased opportunities for enablers, such as unscrupulous lawyers and accountants, to take advantage of the situation.
This Policy Brief outlines the current situation and suggests how to better manage risk without having a negative impact on the fight against financial crime.
About this Policy Brief
This publication is part of the Basel Institute on Governance Policy Brief series, ISSN 2624-9669 and relates to the Basel AML Index of money laundering risk.
You may freely share or republish it under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY-NC-ND 4.0). Suggested citation: Boguslavska, Kateryna. 2023. ‘De-risking of Russian clients: best intentions, unintended consequences.’ Policy Brief 12, Basel Institute on Governance, https://baselgovernance.org/publications/pb-12.
Working Paper 47: Conflict of interest legislation in Brazil, South Korea and the European Union: International case studies
This Working Paper presents international case studies of legal frameworks addressing conflicts of interest and highlights common challenges, opportunities and lessons for practitioners and other interested stakeholders. The report covers three contexts: two national (South Korea, Brazil) and one supranational (the European Union).
The analysis is based on the international standards in the 2020 guide Preventing and Managing Conflicts of Interest in the Public Sector, produced by the World Bank Group, OECD and UNODC at the request of the G20 Anticorruption Working Group.
The Working Paper is published in the context of the USAID Indonesia Integrity Initiative (INTEGRITAS) project, which supports the Government of Indonesia in preventing corruption via enhancing civic engagement and strengthening integrity in the public and private sectors. The case studies and analysis will be of value to anyone interested in drafting, revising or monitoring conflict of interest legislation in any context.
Open-access licence and disclaimer
The publication is part of the Basel Institute on Governance Working Paper Series, ISSN: 2624-9650. You may share or republish the Working Paper under a Creative Commons CC BY-NC-ND 4.0 licence. Please acknowledge the Basel Institute on Governance and link back to this page.
Suggested citation: Costa, Jacopo. 2023. ‘Conflict of interest legislation in Brazil, South Korea and the European Union.’ Working Paper 47, Basel Institute on Governance. Available at: baselgovernance.org/publications/coi.
This study was made possible by the support of the American people through the United States Agency for International Development (USAID). The contents are the sole responsibility of the Basel Institute on Governance and do not necessarily reflect the views of USAID or the United States Government.
Anticorruption Guidance for Partners of State-Owned Enterprises
Drawing on broad stakeholder consultations, corruption case analysis and reviews of existing best practices, this guidance proposes concrete measures that companies should adopt to reduce corruption risks in their work with state-owned enterprises (SOEs) in the oil, gas and mining industries. It also recommends measures SOEs can take to strengthen their anticorruption safeguards.
The guidance for private-sector companies has five parts:
- Conducting due diligence on SOEs
- Avoiding high-risk agents
- Responding to political exposure
- Safeguarding payments
- Protecting joint ventures from corruption
The final section identifies corresponding recommendations for SOEs in each of these five areas.
By adopting stronger safeguards against corruption, international companies and SOEs can avoid costly scandals that hamper their performance and damage their reputations. These reforms would also help protect the interests of resource-producing countries. Past cases clearly show the kinds of economic, social and political damage corruption can cause.
The Natural Resource Governance Institute developed this industry-tailored guidance with a multi-stakeholder approach including affected companies, civil society and others. The Basel Institute was pleased to contribute to the process through its Collective Action team.