Bribery Awareness … and the Tax Examiner

Economic and Social Effects of Corruption Important to remember it isn’t a vicitmless crime. Can take place at the highest levels of government. World Economic Forum estimates cost of corruption at $2.6 trillion. World Bank suggests more than $1 trillion is paid in bribes per annum... Corruption – the problem

The Global response – UN Convention against Corruption Promote and strengthen measures to prevent and combat corruption. Promote international cooperation. Promote integrity and accountability. Signed Dec 2005 by 140 countries Corruption – the problem

Bribery – undue pecuniary or other advantage to alter behaviour/performance. Kickback: individual receives payment to secure a benefit. Secret commission: agent receives payment to influence contract. Facilitation payment: encouraging or ensuring official performs normal duties. Categories of corruption

For next 15 minutes... Identify some typical methods and means of bribery Categories of corruption

Embezzlement – an official appropriating money or other assets. Extortion – forcefully demanding payment in return for using influence. Categories of corruption(2)

Bribery Awareness … Indicators and the role of the Tax Auditor / Examiner

Again about recognising key indicators. Performing two key roles: - Ensuring tax compliance and taxing proceeds of corruption, - Secondly, if identified it is referred to appropriate investigative body. As such, does it need referring to Financial Intelligence Unit for possible ML??? Role of tax auditor

OECD has identified six key thematic areas. 1.External risk environment Nature of business and opportunities for bribery – Public works Review of documents Oil and Gas Banking records Mining International structures Utilities Use of agents/consultants Military/Defence Compliance/risk process Role of tax auditor

2.Parties linked to a transaction Use of unusual or unexpected companies or service providers. Involvement of family / other close relatives. Lack of contract confirming terms of reference or service level agreement. Unusual or excessively generous renumeration package – contract issues. Role of tax auditor

3.Unusual transactional activity Comparisons with industry norms. Lack of transparency about recipients / destination of transactions. Suspicious or unnecessarily complex transactional process. High value / intangible goods linked to transactions – can it be traced? Role of tax auditor

4.The income statement Actions taken outside terms of any contract in place – e.g. Payments or goods. Invoices from unexpected or unusual suppliers. Inconsistent financial records. Lack of transparent tendering process – contracts, negotiations, lack of competition. Role of tax auditor

4.The balance sheet A substantial and unexplained increase in capital. Disposal of assets at less than market value. Existence of loans – poorly explained, badly evidenced and/or difficult to trace. No possibility of verifying receipt or value of any assets supposedly acquired. Role of tax auditor

4.Payments and money flows Use of a notary’s third party account for no obvious need. Volume, value and throughput of transactions in client/business accounts. Evidence of flows to/through high risk jurisdictions. Other types of third party settlement. Role of tax auditor