Bribery Awareness
… and the Tax Examiner
Corruption – the problem
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
Categories of corruption
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(2)
Embezzlement – an official appropriating
money or other assets.
Extortion – forcefully demanding payment
in return for using influence.
Bribery Awareness
… Indicators and the role of the Tax
Auditor / Examiner
Role of tax auditor
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
Oil and Gas
Mining
Utilities
Military/Defence
Review of documents
Banking records
International structures
Use of agents/consultants
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.