Transparency Times November 2015

From the Chair

Suzanne Snively

Suzanne Snively
Chair, Transparency International New Zealand Inc (TINZ)

New Zealand sits at the centre of a perfect storm.

Around the world, leaders of governments, businesses, and organisations are waking up to the need to scour out corruption. Major scandals, such those at FIFA and Volkswagen, have jolted businesses, organisations and governments into being pro-active about strengthening integrity systems as they recognise how quickly hard-won reputations—and economic well-being—can be destroyed by corrupt practices.

Perplexingly, in New Zealand many of our leaders, directors and executives refuse to take seriously the measures that are necessary to prevent corruption and complacency.

When issues are raised to address what appear to be corrupt practices, many New Zealand leaders react defensively rather than correctively. The wider public generally supports them, preferring to shoot the messenger rather than demand accountability.

This low level of willingness to strengthen integrity systems is undermining the legitimacy of our public institutions, civil society organisations and private businesses. One indication is the World Justice Project comparisons with others, foreshadowing the likelihood that both New Zealand’s score and ranking will drop when the 2015 Transparency International Corruption Perceptions Index is published at the end of January 2016.

There are huge challenges to engaging policy-makers (either elected or employed) and business executives to talk openly about their approach to preventing corruption. Where there are integrity officers, the priority often appears to be enforcing the power of senior management rather than building a trusting internal culture.

For the wider public, corruption it is a topic to be avoided—along with politics and religion— which limits the dialogueue concerning ways to achieve greater openness and public accountability.

TINZ’s working hypothesis is that these behaviours stem from lack of knowledge. Its solution is to communicate the huge stakes, and strive to identify and promote key tools and processes that support good governance and transparency.

The TINZ Board was delighted then when the New Zealand Defence Force received an “A” score in the Government Defence Anti-corruption Index.

Speaking at TINZ’s Annual General Meeting (AGM), NZDF’s CEO, Lieutenant General Tim Keating, added to this reassurance. He set out how NZDF intends to not only maintain the “A” grade, but also to address the weaknesses identified by the research, that was carried out to assess the 76 scores that make up the index.

Suzanne Snively, Chair
Transparency International New Zealand Inc.

New Zealand tops Government Defence Anti-corruption Index

The Government Defence Anti-corruption Index (GDACI) 2015 was launched in early November. This is the first global analysis of corruption risk in defence establishments worldwide that includes New Zealand.

The GDACI aims to give governments, armed forces, civil society and citizens the tools to avoid the dangers and inefficiencies that corruption in defence brings. Countries are scored in bands from very low risk (A) to critical risk (F) according to detailed, evidence-based assessment across 76 indicators. These cover five prominent risk areas in the government defence sector: politics, finance, personnel, operations, and procurement.

According to the 2015 UK Special Defence Project (UKSDP) GDACI index report, “New Zealand’s approach to military operations is an exceptional example of global best practice.”

The report does call for improvements in NZDF’s approach to addressing corruption, including ratification of the United Nations Convention against Corruption (UNCAC), more aggressive prosecution of foreign bribery, and bidding company compliance.

Through its engagement in the process to do the GDACI, the NZDF is well placed to leverage off its A ranking. Speaking at TINZ’s 2015 AGM, General Keating said he plans to follow through on the recommendations from the review.

The 76 indicators provide an opportunity for New Zealanders to support a process to specify and implement systems for maintaining integrity right through the public service.

Coincidentally, the Organised Crimes and Anti-Corruption Amendment Bill was passed on the same day that the UKSDP report on the GDACI was released. Enacting the organised crime legislation overcomes the final obstacle to ratification of UNCAC and sets the stage for its ratification before the end of the year. Finally, ratifying UNCAC—which New Zealand signed in 2003—will eliminate a disservice to New Zealand’s reputation with regard to transparency and anti-corruption.

New Zealand has done very well in comparison to others in the GDACI—so far, only the UK Defence Force has scored well enough to join the A category. There is still room for improvement, however.

Among the issues that stood out as most needing attention included the need to strengthen the powers and scrutiny of the Foreign Affairs and Defence Select Committee charged with oversight of the basis of New Zealand’s decisions regarding defence and intelligence.

Janine McGruddy

An anonymous Parliamentarian advised TINZ during the review that the opposition parties lack the resources to research the many government reports they receive. Line-by-line analysis is hard to find and seldom gets close to the sensitive items. Unless opposition members are alerted by someone about an upcoming area to investigate in advance, the opposition parties may miss out during the short time given to Select Committee discussion.

Also noted is that it is never comfortable for a Minister to be open on some topics related to defence. Historically, there used to be time for cross examinations, but then new protections came in.

As a process of civil society engaging with government, the GDACI has been an enlightening experience for me and I would like to congratulate those involved across several government agencies for the free and frank manner in which TINZ has been able to meet and discuss this review. This type of interaction with civil society is sorely lacking in general, so to find it an area often perceived as more closed was heartening.

With the NZDF taking steps to improve its political, financial, personnel, operational and procurement processes, it would now be good to see the same thing done across government.

Janine McGruddy

Director

Transparency International New Zealand

Are New Zealand enterprises prepared for the new anti-bribery legislation?

The Organised Crime and Anti-corruption Bill passed in Parliament on 4 November 2015 bringing New Zealand more in line with international anti-bribery and corruption legislation. The omnibus Bill, which has been divided into 15 Amendment Acts, should also enable New Zealand to ratify the United Nations Convention against Corruption (UNCAC), which it signed in 2003.

Some of the amendments in the foreign bribery area are:

  • provisions on facilitation payments and how they are recorded
  • companies liable for the actions of employees unless they take reasonable steps to prevent bribery—employees include agents, directors and officer
  • fines of up to $5 million and/or up to seven years imprisonment.

Over the years, there has been a geographical shift in the countries that New Zealand trades with. As New Zealand’s trading partners have changed, so have the foreign bribery and corruption risks. Although New Zealand is considered one of the least corrupt countries, the same cannot be said of some of our trading partners.

There are strong indications that many New Zealand businesses operating overseas are not taking foreign bribery risks seriously. A 2015 Deloitte survey of New Zealand and Australian companies showed that 40% of organisations with offshore operations do not have, or it’s not known if they have, a formal compliance programme in place to manage corruption risks.

New Zealand’s reputation is at stake

The perception of New Zealand’s way of trading and our brand are important to future growth. All New Zealanders are involved in some way, as trade also involves importing, which is a source of many consumer goods. Corrupt behaviour could have negative effects on our reputation, and the perception that Kiwis are a people with a high degree of honesty and integrity.

Daniel King

Daniel King
TINZ Director

New Zealand companies already face the risk of financial penalties and/or imprisonment for failure to comply with a number of foreign laws. Non-compliance with the US Foreign Corrupt Practices Act, for example, has resulted in heavy penalties for both US and non-US based companies and organsiations. The UK Bribery Act covers any New Zealand companies with offices or operations in the UK. Both Acts cover foreign bribery acts committed in third-world countries.

International enforcement is gearing up as well. For example, China is taking a harder stance on corruption. The New Zealand Serious Fraud Office is pursuing foreign corruption cases—at present there are four ongoing investigations of New Zealand companies.

Organisations that develop a compliance system to prevent corrupt practice may use it as a defence if an incident does occur. This applies to New Zealand and international legislation.

Even robust compliance programmes may fail to eliminate all risks. Having a robust system in place, rather than feigning ignorance of potential risks, provides evidence of corruption prevention to a court of law.

Building a compliance system doesn’t need to be complicated but it should:

  • be in proportion to your business trading activities
  • identify the main risks to your organisation.

TI has been working with various players, including the business sector, over the years to develop tools and best practice for combating bribery and corruption. An excellent tool is the Corruption Assessment toolbox. TINZ has developed a free e-learning Anti-Corruption Training course in cooperation with Business New Zealand and the Serious Fraud Office.

Daniel King

Director

Transparency International New Zealand

Open Budget Survey

New Zealand retains top rank for fiscal transparency in latest 2015 Open Budget Survey, even though it falls short in Parliamentary oversight and public participation.

Results from the recently released 2015 Open Budget Survey (OBS) show a strong institutional framework supporting “extensive” public availability of budget information, which have helped New Zealand retain its top ranking for transparency, a position first claimed in the preceding 2012 OBS assessment.

The OBS is a comprehensive, independent assessment of budget transparency and accountability covering over 100 countries, produced by the International Budget Partnership (IBP) since 2006. Research for the latest OBS assessment also found New Zealand falling short on other essential “pillars” of public sector governance and financial accountability, including both Parliamentary oversight and public participation. Parliamentary oversight is assessed as “limited” for budget planning and “weak” for budget implementation, with a composite score for legislative oversight of just 45 out of 100. Formal mechanisms for public engagement across stages of the budget cycle are also assessed as “limited”, scoring 65 out of 100, with particular concern about lack of opportunities for public participation in processes involving Parliament and the Office of Auditor General (OAG).

In addition, while New Zealand retained its top rank for the OBS component focussed on measuring public availability of budget information, scoring 88 out of 100 on the Open Budget Index, the country’s performance stands to be improved regarding two key elements of budget transparency. More specifically, 2015 OBS results point to a need for the Government to improve the scope and quality of “citizens’ budget” documentation, that provides information which is readily accessible to the general public. Results also indicate a need for more rigorous reporting of “tax expenditures” (for example, tax concessions such as exemptions, preferential tax rates, deferrals and offsets for specific entities, groups or activities).

The 2015 OBS results reinforce key findings and implications arising from other recent public sector governance assessments and ongoing global initiatives targeting budget transparency and accountability.

For more information visit the International Budget Partnership website. There is an excellent New Zealand infographic.

Transparency International New Zealand 2015 Annual General Meeting

Sir Don McKinnon
TINZ Patron

TINZ Member Attendees at the AGM. From top: Claire Johnstone, Murray Sheard. From left: Janine McGruddy, Alicia Wright, Suzanne Snively, Lieutenant General Tim Keating, Christine Stevenson, Charles Hett, Gus van de Roer.

TINZ 2015 AGM featured keynote speaker Lieutenant General Tim Keating

NZDF Head Lieutenant General Tim Keating spoke about the NZDF and the recently released Government Defence Anti-corruption Index. He set out how the force intends to maintain the “A” grade from the index, adding that it will strive to improve by addressing weaknesses identified in the survey.

Claire Johnstone and Murray Sheard stepping down as Directors

Two Directors stepping aside from their Directors’ roles this AGM were TINZ Deputy Chair Claire Johnstone and TINZ Ethics Chair Murray Sheard. Both demonstrate the combination of intellectual commitment, focussed effort and time that volunteer members contribute to the TINZ Board.

Claire Johnstone

Claire Johnstone at the
TINZ 2015 AGM

Claire has been involved with Transparency International since its inception in New Zealand in the 1990s, serving as Co-Chair in 2010 and as Deputy Chair for the last two years. Claire has served as a TINZ Director for much of the time she’s been involved with TINZ and has strong knowledge and interest in the Pacific and Melanesia where she has worked alongside the Transparency International chapters in Fiji, Papua New Guinea, Solomon Islands and Vanuatu.

There is a strong relationship between those chapters and TINZ. Working together in partnership through Ministry of Foreign Affairs and Trade funding, with connections with TI, the Australian chapter of TI, the United Nations Development Programme, the Office of the Auditor-General, and the Ministry of Pacific Island Affairs the aim is to reduce the effect that corruption has on Pasifika people and their fragile economies. Claire has been concerned to gain acknowledgement that corruption in areas such as fishing, forestry and extractive industries are of particular concern.

She will continue to demonstrate her commitment to this challenge and TINZ and Pacific transparency by assuming a role of delegated authority to provide advice on the Pacific Integrity Initiative to the TINZ Board.

Murray Sheard

Murray Sheard at the
TINZ 2015 AGM

Murray Sheard, PhD Ethics, has contributed his deep knowledge of ethics and the civil society sector as a TINZ Director over the past four years. His calm leadership of the TINZ ethics committee was reassuring in the face of vexatious litigation and his advice and guidance was key to the renewal of TINZ’s TI accreditation.

New Directors elected for 2015/18

Three new Directors were elected at the TINZ 2015 AGM, resulting in a Board of 12 Directors from its December meeting. The Board is further enhanced through the attendance of its Patron, Finance Officer and Administrative Assistance. Members with Delegated Authority are welcome to attend each meeting as well.

Charles Hett

Charles Hett at the 2015 TINZ AGM

“I believe sunlight and transparency are critical features of all social, public and private-sector business environments. I will apply my energy and effort to TINZ to help maintain New Zealand’s relatively positive position and use it to help other parts of the world change and improve. The benefits of a low-corruption society can so easily be lost (like reputation) and are very hard to regain-so focus, energy and effort are continuously needed.”

Charles comes from a finance background as an actuary with a long-term perspective on society and can help TINZ with the financial aspects of its work. He has been a co-opted Board Member since December 2014, taking on various roles and bringing a wide-ranging, essentially private-sector perspective to the Board.

Gus van de Roer

Gus van de Roer at the 2015 TINZ AGM

Gus has a strong background in marketing, branding and communications and will bring these areas of expertise to improve the role, recognition, and objectives of TINZ to its many target audiences. His company, which he sold to an international advertising group in the year 2000, was involved in the analysis, strategy development and execution in the marketing, branding and communication disciplines, and improved many of New Zealand’s leading companies’ market performance.

“I believe that transparency and integrity should stand at the centre of promoting and protecting the image of New Zealand while increasing awareness for its many business and governance interests. New Zealand is a small player in the international scene but has gained a big reputation for its independence and ethics in the public and private sectors. This reputation should be used stronger to advance its many involvements nationally and internationally while motivating participation by a great number of key players who would benefit from this distinction.”

James Brown

James Brown, new Auckland TINZ Director

James Brown, ASB HO Industry Development, Specialist Industries, brings to the TINZ Board his desire to shape and change the standards in which business operates. James says, “Many people look to the Government to change and set out principles in which business should operate. I think it is time that business takes up the mantle and drives the change from within … It is not about the products, it is about our core values and behaviours which should drive us to do more and be better tomorrow than we are today.”

“It is not about the products it is about our core values and behaviours which should drive us to do more and be better tomorrow than we were today.”

AFP PHOTO / FABRICE COFFRINIFABRICE COFFRINI/AFP/Getty Images

FIFA president Sepp Blatter looks on with fake dollars note flying around him throw by a protester during a press conference at the football's world body headquarter's on July 20, 2015 in Zurich. FIFA said Monday that a special election will be held on February 26 to replace president Sepp Blatter.

Corruption risk high in all levels of football

TI released a report this week looking at the publicly available information of all 209 football associations (FAs) regarding their finances, activities, governance structures, and ethics. The results show significant failures in transparency and accountability of FAs, heightening their corruption risks.

Between 2011 and 2014, FIFA distributed a minimum of US$2.05 million to each of its 209 member FAs. During that same period, FIFA also gave US$102 million to the six regional football confederations.

The study shows there is no clear way to track what the FAs do with their money:

  • 81% of FAs have no financial records publicly available
  • 21% have no websites
  • 85% publish no activity accounts of what they do.

It is clear that FIFA needs to be reformed from the bottom up as well as the top down to tackle the current corruption crisis.

Josephine Serrallach

Josephine Serrallach TINZ Director

New Zealand Football (NZF) scored well. NZF is one of only 14 football associations with top marks in all four categories. TI’s report found that these 14 football associations publish the minimum amount of information necessary to let people know what they do, how they spend their money, and what values they believe in.

“We congratulate NZF for being in the top 14. We hope NZF would sustain further scrutiny to take a leadership position in encouraging FAs throughout the world to establish accountability and controls to ensure that football is clean at all levels,” says TINZ Director, Josephine Serrallach.

According to TI’s report, “Even FAs with a top score still need to reveal much more to the public about their organisation and how they spend the cash that pours in from FIFA headquarters and their own revenue-generating activities.”

Especially given the behaviour of their international body, it is important that FAs implement and support anti-corruption practices, achieving higher standards of transparency and accountability. Only then can football win back trust among its fans.

Transparency International’s media release is available on www.transparency.org, as is a copy of the report.

Rugby Transparency

Photo courtesy allblacks.com

Rugby's clean reputation strengthens New Zealand's brand

There is no doubt that being number ONE in the world produces economic and social benefits. Economic ripples of the All Blacks’ victory are already adding value to the country’s brand. The All Blacks’ success appears to involve everyone in New Zealand regardless of age, gender, ethnicity or social strata. It has been said that rugby here is more than a game, it is part of New Zealand culture.

While the All Blacks players and coaches deserve all our praise for their efforts that led the team to victory, the behind-the-scenes people also deserve recognition, including the people who work hard towards maintaining the integrity of the sport.

As recent corruption scandals in sport have highlighted, from bribery to match fixing and doping, it is apparent that international sport organisations are not always well-equipped to prevent corruption, as they often have less-developed mechanisms of governance than governments, businesses, and civil society organisations.

TINZ and our umbrella organisation, TI, are committed to fighting corruption in sport by connecting the sports community to the wider movement against corruption. This led us to ask what is so different about rugby, since it does not appear to be tainted by corruption.

The organisation that runs the game in this country, New Zealand Rugby (NZR), is very focussed on ensuring the game remains an honest test of skill and ability. It is well aware that that New Zealand is not immune from corruption, and so for some time has had a focus on ensuring the game remains clean.

NZR has employed a full-time integrity manager and introduced a number of measures, systems and regulations to prevent doping and match fixing, and to ensure that all registered rugby players, at all levels, are bound by these regulations. Education and training are provided to contracted players and administration staff about the rules that apply to doping, match fixing and prohibition of betting, and they are all required to sign an anti-corruption and betting acknowledgement.

Match fixing and betting measures

NZR’s Anti-corruption and Betting Regulations are aligned with World Rugby regulations, which apply internationally, to all people involved in the sport at all levels—international, professional and semi-professional. The simple message is that everyone involved in professional rugby (players, management, and administration) is prohibited from betting on all forms of rugby anywhere in the world.

We were keen to learn how these regulations are being applied, and whether their Fraud Detection System (FDS—a system provided by international company Sportradar to monitor irregular betting patterns and movements) is a successful detection tool.

By tracking trends and movement of money across a wide range of markets, FDS can detect irregular betting patterns in real time, both pre-match and live. FDS provides reports to NZR on any material movement in odds, and assesses the integrity of any game. If fraudulent activity is suspected, it compiles a more detailed report that can be the basis of criminal investigation into match fixing, and can enable disciplinary action.

NZR closely monitors these FDS reports and TAB accounts, and although the system is not fool-proof, it can identify those breaching the regulations and the irregular patterns that point to possible ‘corrupt underperformance’.

Doping, bullying and harassment

Rugby’s anti-doping rules incorporate the New Zealand Sports Anti-doping Rules and the WADA code, and NZR also has guidelines in place regarding supplements and medications, with regulations regarding illegal recreational drugs currently being drafted. It has also provided guidelines to Super Rugby teams and Provincial Unions covering bullying and harassment.

Financial accountability

TINZ was interested to know how New Zealand’s Provincial Unions and Super Rugby clubs  measure up under the categories of financial accounts, organisational statutes or charters, annual activity reports and codes of conduct or ethics. We were assured that the financial accounts of the Provincial Unions and Super Rugby clubs are for the most part in good order and they are monitored by NZR as appropriate. Where they do face financial challenges, NZR provide support and advice in an effort to be proactive rather than reactive in order to avoid any substantive issues.

TINZ has not done a full assessment of rugby’s transparency, but we can reassure the New Zealand public that NZR has integrity systems in place that aim to keep the sport of rugby in New Zealand free from all forms of corruption. NZR, however, recognises there is no room for complacency and is committed to evolving its policies and education so rugby’s good record remains intact.

In case you missed it

Serious Fraud Office investigating multiple corruption claims

New laws have put four Kiwi firms under the spotlight, writes Richard Meadows published in stuff.co.nz.

The Organised Crime and Anti-corruption Legislation Bill passed

New Zealand strengthens law on organised crime, graft

Parliament passes Anti-corruption Bill 3news.co.nz

UNCAC conference of state parties

Transparency International Media Release UN Anti-corruption Convention at a crossroads Governments need to work more closely with civil society

John Key on EU trade negotiations

New Zealand Herald: John Key: Negotiation tactics with EU likely to be more transparent

TI on G20 countries crime fighting

Media Release: Transparency International report shows G20 countries fail to keep their promises on fighting crime