Non-compliance with fraud and corruption prevention legislation a major risk


Parliament.jpgWhilst the word “risk” is fast becoming a cliché, it has increasingly important connotations for organisations owing to the plethora of legislation both here and internationally aimed at preventing fraud and corruption, says Alan Low of Purchasing Index (PI) in this month’s SmartProcurement.

Local legislation includes:

• Prevention of Organised Crime Act (POCA) – 1998
• Protected Disclosures Act (PDA) (“Whistleblowers Act”) – 2000
• Financial Intelligence Centre Act (FICA) – 2001
• Prevention and Combating of Corrupt Activities Act (PCCAA) – 2004

Additionally, the UK Bribery Act (2011) and United States Foreign Corrupt Practices Act (1977) have provided SA’s most prominent trading partners with effective teeth to attack corruption globally. The USA authorities have made it plain that irrespective of the country they will find a way to pursue corruption, carried out anywhere in the world, in US courts!

Section 43 of the new Companies Act (2011) obliges all state-owned and listed public companies and private companies above a certain size to set up a Social and Ethics Committee to implement the Organisation for Economic Co-operation and Development’s (OECD) recommendations on preventing corruption. This includes the development and implementation of organisation-wide controls, ethics and compliance programmes for preventing and detecting bribery. Many SA companies are still unaware of these obligations.

AlanLow_latest.jpgRecently a large SA company trying to do business with a US organisation was asked to confirm and provide proof that it had in place the necessary controls to prevent corruption; it could provide proof of conformance to only 20% of the requirements.

Whether your organisation has implemented all of the above or not, there is an urgent need to apply particular caution and stringent oversight to all procurement transactions, whether local or international. This includes:

• scrutiny of all new (and existing) suppliers to ensure that they are who they hold themselves out to be;
• investigating the technical and personal preferences of internal customers to ensure that the resulting transactions meet the highest probity and ethical standards; and
• ensuring that, in the absence of policy, offers or promises of gifts, entertainment or travel meet the following criteria:

1. Not given to influence or reward action (or inaction).
2. Serve only a legitimate business purpose.
3. Would not embarrass the organisation.
4. Are appropriate in value and nature considering the local law and custom, the position of the recipient and the circumstances.

Analysis tools and services are now available that can help you by providing transparency within and outside your organisation. These include advanced real-time analysis tools with algorithmic functions to highlight high-risk transactions and external services that show relationships between staff and suppliers to three degrees of remoteness.

It is important to remember that ignorance of the law is not an acceptable defence in court and that there is no statute of limitations for criminal acts.

For more information on analysis tools and services contact PI’s Alan Low

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