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C
ORRUPTION IS ONE
of the primary causes of poverty. Its
most profound and deadly impact is on the poor.
Corruption makes the eradication of poverty much more
difficult by siphoning resources away from their intended purpose
and undermining the basic services (security and law enforce-
ment, health services, education, public infrastructure) on which
the poor especially count to improve their condition.
Transparency International estimates that in Africa USD148
billion are lost every year to corruption. This figure is equivalent
to half of Africa’s external debt, which, according to the
International Monetary Fund, reached USD284 Billion in 2005.
1
The World Bank estimates the total worldwide cost of corrup-
tion is USD1 trillion per year, and emphasizes the potential
benefit of effective measures designed to address the problem.
The Word Bank’s research has found that there is a ‘400 per cent
dividend’ of good governance and corruption control: in the long
run, countries that improve control over corruption and establish
the rule of law can expect on average a four-fold increase in income
per capita. Thus, a country with an income per capita of USD2 000
could expect to attain USD8 000 in the long run by making strides
to control corruption. Similarly, such a country could expect, on
average, a 75 per cent reduction in child mortality.
2
Because of the misuse of funds which should be available for
general education, it can be argued that efforts to close the digital
divide and to promote inclusiveness in the implementation of infor-
mation and communication (ICT) will be less effective if the problem
of corruption is not tackled effectively. Fortunately, ICT can come to
the rescue. In addition to being a direct instrument to support devel-
opment, ICT can have an important role in the fight against
corruption by fostering transparency in the calculation and subse-
quent recording of transactions.
The most important international actions that must be taken
to address corruption are policy driven and aim to create an envi-
ronment that clearly sanctions this practice. These include the
ratification and implementation of the United Nations
Convention Against Corruption and of the OECD Convention
on Combating Bribery of Foreign Public Officials.
One of the main objectives of these conventions is to stem the
‘supply side’ of the problem by enforcing the laws against bribery
and ensure that companies no longer view bribery as an accept-
able way to win contracts. The OECD convention, which follows
many of the principles set by the 1977 US Foreign Corrupt
Practices Act, marks an important step in the international move-
ment to criminalize bribery, in that its signatories account for
about two-thirds of all global exports and approximately 90 per
cent of worldwide foreign direct investment.
3
The OECD convention requires that national laws establish the
bribery of foreign public officials as a criminal offence and estab-
lish the liability of enterprises for the offence. In practice, a private
company can be held liable in its home country if an employee of
one its foreign branches engages in corruption activities, even
without the knowledge or consent of the head office. There are also
important provisions relating to the maintenance of sound internal
controls and of properly supported and complete books and records.
The national implementations of the convention – along with
other well known pieces of legislation, such as the US Sarbanes-
Oxley Act of 2002 – define a clear responsibility and a challenge
to the top management of international companies in view of
their increased personal exposure in the face of misconduct by
company employees or agents/partners, or failure to maintain a
truthful record of all business transactions.
To manage this risk, many companies have adopted compliance
programmes which aim to avoid and detect non-compliant behav-
iour and processes. Compliance programmes – based on guidelines
such as the Business Principles for Countering Bribery developed by
Transparency International – are probably the single most impor-
tant measure contributing to prevention and deterrence.
4
In some countries, national laws consider effective and robust
compliance programmes as mitigating or liberating factors in
case of violation of the law by rogue employees or agents.
Transparency represents one of the factors that contribute to
the meaningfulness and robustness of a well-structured compli-
ance programme, which requires a proper accounting system
to be in place.
An example of how ICT can help foster transparency relates to
accounting systems. Modern Enterprise Resource Planning solu-
tions make it much easier to implement effective internal controls,
improving the audit trail of business transactions and increasing
transparency.
Electronic invoicing – defined as the exchange of machine-
readable documents between commercial partners, which allows
the automation of the invoicing reconciliation and routing process
– represents a further, promising measure to foster transparency
and to support the fight against corruption. Invoices received for
non-existent transactions represent the usual method to set up the
funds out of which to pay bribes, a practice that is much easier
to detect and suppress in an electronic invoicing scenario.
Electronic invoicing is an attractive option because it could
become pervasive in a comparatively short time, given its poten-
tial benefits to businesses and tax administrations. Electronic
invoicing can save companies hundreds of millions of dollars
in transaction costs worldwide, and can help tax administra-
tions fight tax evasion while allowing for a significant
simplification in the administrative tax burdens companies must
comply with. This is increasingly recognized by forward-looking
companies such as ABB, which has launched an electronic
Using ICT to fight corruption and save costs
Jermyn Brooks, Member of the Board Transparency International
Written in collaboration with Fabio Annovazzi