Anti-corruption 101

MARIA SLADE
Last updated 05:00 21/08/2014
NickPaterson
Nick Paterson

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You wouldn’t think there was a down side to being one of the least corrupt countries in the world.

But there kind of is, says Nick Paterson, general manger of fraud and corruption at the Serious Fraud Office (SFO).

New Zealand was ranked first equal for freedom from corruption in the latest Transparency International Corruption Perception Index, and has consistently maintained a place near the top of the annual rankings.

‘‘As a result I suspect people don’t see corruption as a major risk for a business, and haven’t seen it as something they need to address,’’ Paterson says.

‘‘Unfortunately that’s not quite true.’’

While it may not be an issue at home, increasingly Kiwi businesses are trading in markets where corrupt practices are commonplace, and awareness of the pitfalls is not high, he says.

It is why the SFO and Transparency International have joined forces with a handful of other agencies and service providers to offer free anti-corruption training courses. The group has set up online training modules which are now available, and later this month businesses will also be able to attend workshops in a number of centres around the country.

Ian Tuke, associate director of forensics at Deloitte in Auckland, helped put the courses together. They introduce business people to the subject of corruption and how international law in the area might apply to them, he says. Then they put forward a number of real life scenarios, alternatives for dealing with the situations, and the possible consequences.

One of the scenarios goes like this: a Kiwi company setting up a new installation in China runs into a problem at the docks, where a union official is demanding a $50,000 contribution to the worker welfare fund before a shipment of goods can be released. Clearly it could be a bribe. What should the Kiwi firm do?

At the very least the company should consult its lawyers, and escalating it to the local New Zealand government representative is also an option, Tuke says. But there is no silver bullet. ‘‘Some tough decisions may have to be made around whether you want to do business in that particular part of that country.’’

If the company makes the payment it could find itself on the wrong side of international regulations which are becoming increasingly tough - particularly in the United Kingdom, where new anti-bribery legislation is among the most stringent in the world, Tuke says.

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‘‘You’ve got some global reaching bits of legislation now that are fairly new, but you wouldn’t want to come unstuck and be pursued by the UK SFO for a UK Bribery Act offence that’s maybe taken place in China, just because you have registered operations in the UK,’’ he says.

‘‘We have heard that (the UK SFO) do have a desire to pursue companies outside of the UK for offences.’’

The risk of corruption is something Baiju Lal, general manager of Auckland-based tool distributor Fox and Gunn, wishes he had known more about.

The firm was caught by an email fraud when importing samples from China. The fraudsters intercepted Fox and Gunn’s email to the legitimate supplier and changed the address by just one letter so that the Kiwi firm would not notice. The scammers then sent their own bank account details for payment, and Fox and Gunn ended up losing around $50,000.

‘‘We had to wear that,’’ Lal says.

‘‘Who do you go to? It’s too small for the SFO. The Chinese embassy aren’t interested. Our supplier says, ‘okay, well then fax us the order every time’. Well who does that now?’’

The firm was disappointed that not even its bank could offer any advice. It hasn’t happened again and Fox and Gunn is a lot more vigilant, but Lal knows of other companies which have been hit by the same thing. He thinks the anti-corruption courses are a great idea because, like him, these firms also probably have no idea where to seek help.

Paterson says historically the New Zealand SFO has received few allegations of corruption overseas but in the last two years it has opened a handful of investigations.

He confirms that unfortunately Fox and Gunn’s case would be too small for his office, but says the police may be able to help in such situations.

‘‘It would be important to report it, if nothing else. If we have one company pinged like that and actually there are... 50 companies in New Zealand who are all getting stung in the same way, then we have to do some publicity about it to help prevent it, or we might be able to go to an overseas law enforcement agency...

‘‘From an intel point of view it’s quite important to hear about it somewhere.’’

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Unlimited magazine, published by Fairfax Media, is New Zealand's leading digital business magazine dedicated to entrepreneurs, start-ups, leaders and innovators. To subscribe, go to www.mags4gifts.co.nz

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