Financial Times

Better governance
Cracking the whip against fraud and corruption
By Sunil Karunanayake
Corporate scandals in the developed world and its consequent effects on investors and public have seen the emergence of new laws and tightening of the regulatory regimes and corporate governance.

In Sri Lanka too, the Institute of Chartered Accountants of Sri Lanka led the way with the creation of a Financial Reporting Faculty and quite recently the Securities and Exchange Commission issued specific guidelines to auditors on the audits of listed companies. However all these were confined only to the corporate business sector.

Chartered Accountant Nihal Amarasekera who is heading the key public sector reforms body PERC told a recent SEC seminar that the government will soon be taking steps to set up a Anti Fraud and Corruption Commission on the lines of the Singapore model.

Though somewhat late in the day this move is most welcome. Countries in the region like India (Central Vigilance Commission), Hong Kong (Independent Commission against Corruption), Bangladesh (Bureau of Anti Corruption) and Singapore and other countries like Australia (ICAC), UK, USA and even some of the African countries have already enacted legislation to give strength to the fight against corruption, a priority need.

The Permanent Commission for Bribery and Corruption, declaration of assets by public officers and the Parliamentary Select Committees for parliamentarians and the Ombudsman are some of the existing checks in the Sri Lankan system. Unfortunately these instruments to date have failed to meet the growing civil society demand and confidence for a corrupt free society with the only exceptions being the enforcement of law against some ministers and MP's under the Bribery Act in the late fifties.

In the developed west and the industrialized East Asia, corruption is treated with all the seriousness with prosecution and punishment of the guilty. The World Bank and Transparency International along with OECD have carried out extensive research in corruption in most of the countries and are continuing with their action plans.

The World Bank defines corruption as " use of public office for private profit" while Transparency International defines corruption as " misuse of entrusted power for private gains". Corruption is a multi-facetted product coming under the form of bribes, kickbacks, extortion, commissions, nepotism, favouritism, abuse of power etc.

An Indian expert has identified five major players in the vicious cycle of corruption working in harmony. They are the Corrupt politician, Corrupt bureaucrat, Corrupt businessman, Corrupt NGO and the underworld criminal, perhaps this combination is not uncommon in most parts of the world.

It is hoped that the government will give lot of thought before enacting legislation for the proposed anti fraud commission by learning from the past mistakes in similar situations where public aspirations were not fulfilled.

The commissioners need to be citizens of unquestionable integrity, with proven track records and certainly without any political affiliations. These attributes along with competent and adequate support staff are necessary ingredients to combat this ever-increasing malady involving public funds.

The silent public has always looked forward to with sincere hope and faith at every new government but sad to say that these expectations have never been fulfilled. All what we have witnessed are politicians accusing each other with no real benefit to the country. Legislation should clearly provide for detection, speedy investigations and prosecution and deterrent punishment.

Given the impact of technology by way of computer crimes, speedy money transfers etc the proposed commission will also need to strengthen the investigators and prosecutors with specialized knowledge and modifications to the existing legal framework.

Corruption always involves two parties the giver and the taker. While there has been much debate and focus on public officials and politicians the searchlight on the business community has been somewhat light although increasing pressure on business ethics and good governance has added some consolation. It is reported that the quality and quantity of direct foreign investment is directly related to the ethical behaviour of both private and public sectors.

Immense power in the hands of politicians (further complicated through electoral systems), delayed justice and weak enforcement, scarcities of goods and services, complicated, rigorous rules and procedures, quality of public servants, poor accountability and the network support flowing from the socio political relationships more commonly labelled as the old boys clubs are the key reasons for corruption to flourish.

These are some of the food for thought for the proposed commission to look into. Corruption brings a disproportionate amount of monetary returns to those who are involved in it without much fear or risk of being prosecuted.

Existing legal provisions have not been strong enough to pose a deterrent nor has there been much of public response due to a non-conducive environment. We could draw some knowledge from India where steps have been taken to enact legislation to forfeit property of the wrongdoers through the Corrupt Public Servants Act which extends its jurisdiction to politicians too.

This apart, Indian legislation also provides for Independent criminal action to be taken against corrupt politicians. We also need to create an anti corruption culture, and this could be best achieved by moulding the children from their schooldays.

This will naturally build up a youthful force who will be able to bring a tremendous amount of influence on the rulers with their ideological attitudes. Professional associations and in particular the Bar Association and the Accountants Institutes too will have a crucial role to play.

Though not related to the subject strong lobbying by youth activists have resulted in a reduction in cigarette smoking among young people. In combating corruption, the commission needs to act with courage to fight pressure groups that will oppose any measure to prevent public frauds.

In Sri Lanka we've often witnessed agitation against dismissals of corrupt employees, protests and lightning strikes by private Bus operators against punishment to law breakers. This means the commission's scope needs to be widened to cover an extensive area of public life.

The writer holds fellowships in the ICASL (FCA) and Chartered Institute of Management Accountants UK (FCMA) and a MBA. He retired from Unilever Ceylon Tea division as the Commercial Controller and was also a director at Brooke Bond. He continues to serve as a consultant at Unilever.

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