Financial Crime and Development: Government Response to the Committee's Eleventh Report of Session 2010-12 - International Development Committee Contents


Appendix: Government response


The Government welcomes the International Development Committee's Report on Financial Crime and Development. We welcome the support by the Committee to ensure that the ex gratia payment from BAE Systems (BAE) is made as soon as possible after a long delay; and that the payment is used effectively for development purposes. The Committee's Report provides clear and useful recommendations on both the specifics of the BAE Tanzania case; and on the handling of future cases, described by the Committee as reparation payments.

This Government Response has been co-ordinated by the Department for International Development (DFID) but is a joint response from DFID, the Ministry of Justice (MoJ) and the Serious Fraud Office (SFO). This Response follows the main headings and paragraph number of the section on Conclusions and Recommendations in the Committee's Report.

Ensuring payment is used effectively for development purposes

1. The Government agrees with the Committee that BAE should have sought an early discussion with DFID. If DFID had been assigned a designated role in the BAE payment at the outset, some of the delays in arranging payment of funds might have been avoided. We also agree with the Committee's recommendation that DFID be involved from an early stage in providing advice for any future reparation payments of this kind. (Paragraphs 1 and 3)

2. The Government welcomes the Committee's endorsement of the proposal from the Government of Tanzania that the ex gratia payment from BAE be used for education purposes. We confirm that all parties have agreed that the payment from BAE Systems will be used specifically to finance textbooks, teachers' guides, syllabi and desks for primary schools in Tanzania. This will be known as the Primary Education Support Project (PESP). (Paragraph 2)

3. We further agree with the Committee's recommendation that an external audit of the Project be carried out to international standards. This will help ensure that the use of the funds for the benefit of the people of Tanzania can be clearly demonstrated. (Paragraph 2)

4. On DFID's recommendation, the management of the funds will be governed by a Memorandum of Understanding (MoU) to be signed by the Government of Tanzania (GoT), BAE, DFID and the SFO. The MoU and its annexes provide detailed arrangements for audit, comprising:

i)  The GoT agencies' internal audit processes;

ii)  Routine audit by the Tanzanian National Audit Office (NAO) of all the agencies in the education sector on an annual basis;

iii)  External audit for the PESP (recruited by the NAO for all parties); and

iv)  A Procurement Agent to oversee the procurement aspects, which will feed into the external audit (recruited by DFID).

5.  In addition, DFID has recruited a textbook expert to review the textbook part of the procurement process including textbook selection. This is currently underway.

Timing and arrangements for making the payment

6. The Government fully recognises the Committee's concerns about the long delays by BAE in making the ex gratia payment to Tanzania. (Paragraph 4)

7. The Government welcomes the fact that BAE have sent the IDC a letter undertaking to make the ex gratia payment to the Government of Tanzania and that BAE will shortly be signing the MoU referred to in paragraph 4 above.

8. The Government does not envisage that the SFO will need to take any action to enforce its agreement with BAE. However, the SFO does have powers to take further action, if this is needed.

Monitoring the impact of the Payment

9. The Government welcomes the committee's commitment to monitor that the promised additional textbooks, syllabi for teachers, desks for children, houses for teachers in remote areas and other educational materials have been delivered. To assist the Committee in this objective, DFID will provide periodic progress reports on delivery of textbooks, teachers' guides, syllabi and desks as requested. (Paragraph 5)

Proceedings against individuals in Tanzania

10. The Government agrees that those involved in financial crime should be dealt with appropriately and welcomes the Committee's intention to monitor proceedings in Tanzania. (Paragraph 6)



Future Settlement Agreements

11. We accept the Committee's recommendation that future settlement agreements made by the SFO, on the basis of plea bargaining in relation to financial crimes, should be drawn much more tightly than the agreement concluded with BAE Systems. The SFO accepts that the agreement with BAE could and should have been drafted more precisely, with specific, explicit provisions relating to the date and method of payment and with appropriate safeguards to protect the interests of the intended beneficiaries. The SFO therefore accepts the central conclusion of the Committee's Report that future agreements of this type "should be explicit about what those involved are required to do and include a timetable for the action required of the company". (Paragraph 7)

Reparations to Developing Countries

12. We welcome the Committee's analysis that existing legislation is sufficient to allow for reparations to be made to developing countries by British companies found guilty of financial crimes. We also agree that reparation payments be proportionate to the offence. (Paragraph 8)

Changes to the Bribery Act 2010

13. The Government endorses the Committee's recommendation that there should not be any changes to the Bribery Act 2010 at this very early stage in the life of the Act. Although it is too early to make any assessment of the impact of the legislation, the Government is confident that the Act will have a positive benefit for UK business through an enhanced reputation for ethical standards, reduced costs incurred in doing business and a clearer business framework. In addition, the Act is an integral part of the UK's contribution to raising standards of anti-corruption measures internationally through the OECD, United Nations, the Council of Europe conventions against corruption and G20. (Paragraph 9)

Judicial Involvement

14. The Government welcomes the Committee's comment on the suggestion from SFO that in cases of complex financial crime involving plea bargaining, there should be the possibility of taking a proposed resolution to a judge before a formal charge has been brought. Since giving evidence to the Committee in July, the SFO has been considering this issue with the Crown Prosecution Service and the Attorney General's Office. There has also been informal consultation with stakeholders on the possibility of "deferred prosecution agreements" which would address the SFO suggestion. Once the proposals are sufficiently developed, Government will decide whether to take these proposals forward and, if so, whether to initiate a formal consultation process. (Paragraph 10)

Government Policies on Transnational Crime

15. The Government agrees with the Committee's view that there is a need to inform the public about the investigation and prosecution of transnational financial crimes. (Paragraph 11)

16. The Government is keen to communicate its anti-corruption activities to the public and the Justice Secretary is raising the profile of the UK's work in this field in his capacity as International Anti-Corruption Champion. He has briefed the All-Party Parliamentary Group on Anti-Corruption in November 2011 and will address delegates at the G20 Anti-Corruption Working Group in February in London, which the UK is co-chairing with Mexico.

17. The UK will be reviewed on its anti corruption work this year by OECD and the UN Convention against Corruption (UNCAC) and their conclusions will be published. As part of the Government's much enhanced work to combat corruption, DFID is considering the argument for producing an annual Anti-Corruption Report, as suggested by the Committee. In addition we will report quarterly to the Independent Commission for Aid Impact (ICAI) on progress in implementing their recommendations on strengthening our anti-corruption mechanisms, particularly in light of our decision to work in more fragile and conflicted affected states.



 
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Prepared 27 March 2012