Britain’s failure to introduce clear legislation to outlaw bribery and corruption in international business was castigated yesterday by a committee of MPs as a “shameful situation” that damaged the reputation of the City of London and the country abroad.
The international development committee report on corruption said it was “incredible” that Britain had failed to implement the organisation for economic cooperation and development’s convention on the bribery of public officials. OECD officials have criticised Britain’s lack of compliance, unique among developed countries, and bracket the UK with Turkey, Brazil, Argentina and Chile.
The report said: “New legislation is urgently needed to meet our international obligations. We cannot understand why the government has not yet introduced legislation to deal with this shameful situation, especially as the issue is unlikely to be controversial.”
As long as the convention was not implemented, the committee said, Britain could not credibly continue to make improvements in other countries’ governance a condition of development aid.
The committee also criticised the “entirely unsatisfactory” practice, confirmed by Treasury officials, whereby British companies that pay bribes wholly outside the UK can claim tax relief on them. Evidence presented to the committee from pressure groups suggested western businesses paid bribes conservatively estimated at £53bn a year, with the arms and construction industries the worst offenders.
Though it welcomed government plans to update the laws against money laundering, the report said Britain’s response to the problem of corruption was uncoordinated and piecemeal, with enforcement bodies underfunded and underresourced. “We are deeply concerned about the vulnerability of one of this country’s most valuable financial assets – the City of London,” the report said.
Weaknesses in the banking system were highlighted last month, the report noted, with the publication of an investigation by the financial services authority into accounts linked to the family and associates of the late Nigerian president Sani Abacha. It found that 42 accounts held at 23 banks in the UK had a turnover of £0.87bn between 1996 and 2000. Fifteen of the banks, including Barclays and Midland, had “significant control weaknesses”; seven have been ordered to correct failings, which may lead to prosecutions.
A particular weakness was identified as the “patchy” reporting of suspicious transactions to the national criminal intelligence service, especially by lawyers and accountants who are prime targets for money launderers.
Lawyers, under the cloak of client confidentiality, can mask the beneficial owners of accounts. Both professions, the report said, should be given mandatory training on the prevention of money laundering.
The Conservative chairman of the committee, Bowen Wells MP, said yesterday: “We have not at the moment got any effective defence against these practices. We are a world centre for laundering the proceeds of bribery and fraud.”
A number of senior executives from BP, Unilever and Balfour Beatty admitted to the committee that they paid low-level “facilitation payments” abroad to get things done quickly.
But the committee was unequivocal that this was corruption and should be made illegal: “We see no difference between bribery and facilitation payments.”
David Pallister, Guardian, April 4, 2001