Tackling corruption overseas Contents

Conclusions and recommendations

The UK Government approach to tackling corruption overseas

1.Policy coherence across Government on its approach to anti-corruption is essential to ensure that DFID’s efforts to reduce corruption in developing countries are not undermined by broader policies and programming pursued by other Government departments. (Paragraph 16)

2.Given the amount of money that is laundered through the UK, we welcome the Action Plan for Anti-Money Laundering and Terrorist Financing launched in April 2016 and look forward to seeing this plan implemented in its entirety by the new Government. (Paragraph 20)

3.We recommend that the Government consider conducting a thorough assessment of money that has already been laundered through the UK and continue to lobby for the same level of transparency and accountability to be applied in the UK’s Overseas Territories and Crown Dependencies. (Paragraph 21)

4.The Government has so far failed to persuade the UK’s Overseas Territories and Crown Dependencies to create central public registers of beneficial ownership. Although a number of stakeholders have suggested the Government could compel them to act, in practice this could raise constitutional questions about their self-determination and (qualified) constitutional autonomy. However, lack of transparency in the Overseas Territories and Crown Dependencies will significantly hinder efforts to curb global corruption and continue to damage the UK’s reputation as a leader on anti-corruption. It is disappointing that the Government has missed an opportunity to build on the momentum of the Anti-Corruption Summit. (Paragraph 28)

5.The Government must use the full weight of its influence to lobby the UK’s Overseas Territories and Crown Dependencies to increase transparency by creating public beneficial ownership registers. (Paragraph 29)

6.Public country-by-country reporting of multinationals’ profits and payments to governments will enable citizens, civil society and journalists in the countries where they operate to check whether companies are paying their fair share of tax. We therefore warmly welcome the Government’s decision to accept an amendment to the Finance Bill 2016 which will permit the Treasury to make country-by-country reporting public. (Paragraph 33)

7.The amendment to the Finance Act 2016 allows, but does not commit, the Government to publication of country by country reports produced by multinational enterprises. We urge the Government to publically commit to making country by country reporting by UK-based multinational enterprises public. This will enable non-governmental stakeholders in developing countries to hold the companies—and their governments—to account if appropriate levels of tax are not being paid. (Paragraph 34)

8.A large number of major oil, gas and mining companies, including those engaged in commodity trading, are registered or listed in the UK. Because of this, by tightening its regulations on transparency the Government can play an important role in rooting out corruption that is negatively impacting resource-rich developing countries like Nigeria. (Paragraph 37)

9.We welcome the Government’s continued commitment to tackling corruption in the extractive industries and encourage it to engage with Publish What You Pay’s suggestions on commodity trading to see what more can be done to encourage greater transparency. (Paragraph 38)

10.We welcome the Government’s announcement that it will develop a cross-government Anti-Corruption Strategy and ask that it provides us with an update on progress and a timeline for publication of the Strategy, which is due to be released before the end of 2016. (Paragraph 44)

11.We thank the Government’s Anti-Corruption Champion, Rt Hon. Sir Eric Pickles MP, for meeting with the Committee privately in advance of the UK Anti-Corruption Summit to discuss its aims and possible outcomes. However, although we understand that non-Cabinet members may have more time to dedicate to the post, we agree with the view that a Cabinet-level appointment to the post of Anti-Corruption Champion would enable them to exert greater influence and ensure more effective coordination at the highest levels of Government. (Paragraph 50)

12.We welcome the establishment of the Joint Anti-Corruption Unit (JACU), based in the Cabinet Office, as a mechanism for ensuring greater cross-government coordination on anti-corruption efforts. (Paragraph 51)

13.We understand the concerns that there is not yet an official parliamentary mechanism for holding the Champion to account on the progress of the UK Anti-Corruption Plan and the suggestion that the Champion produces an annual report to Parliament. We note that since this recommendation was submitted to the Committee, the Government has released a Progress Update on the Anti-Corruption Plan which was brought to the attention of the House in a written statement from John Hayes MP, the then Minister for State and Security at the Home Office, on behalf of the Minister and the Anti-Corruption Champion. (Paragraph 52)

14.We recommend that the Government announce the appointment—or reappointment—of the Anti-Corruption Champion as soon as possible, in order to show its continued commitment to tackling corruption. We believe that this position should be a Cabinet-level appointment. A Cabinet-level Champion would be able to exert more influence, encourage a coordinated approach and ensure that anti-corruption efforts remain a key priority at the highest levels of Government. (Paragraph 53)

15.We also urge the Government to formalise the Joint Anti-Corruption Unit (JACU) currently based at the Cabinet Office, in recognition of the fact that tackling corruption at home and overseas requires coordinated delivery of the UK Anti-Corruption Plan and forthcoming Anti-Corruption Strategy across Government. (Paragraph 54)

16.We remain concerned that discussions and decisions on international cooperation in tax matters are happening primarily through the OECD. We understand the Government’s reservations with regards to the previously proposed upgrading of the UN Tax Committee, and concern that there would be duplication with the work the OECD is conducting. We also welcome the work that the OECD has undertaken through its Base Erosion and Profit Shifting (BEPS) work. However, international tax discussions must be fully reflective of international concerns, including those of developing countries, and we remain concerned that the OECD—due to its composition—is not adequately reflecting the needs of the poorest countries in its policy outcomes. (Paragraph 58)

17.The Government should reconsider whether the OECD is the best forum for discussions and decisions on international tax matters. If the Government believes it is, then more must be done to ensure the voices of developing countries are heard within this forum and that policy outcomes are reflective of the needs of both developed and developing countries. The Government should provide us with an update on work in this area. (Paragraph 59)

18.As the OECD’s base erosion and profit shifting (BEPS) work is rolled out to different countries, the OECD should consult developing countries regularly on the effectiveness of the measures in preventing base erosion and profit shifting from their jurisdictions and seek views on suggested modifications or enhancements. As a key OECD member, the UK Government should encourage and support this action to ensure that developing, as well as developed, countries benefit fully from this initiative. (Paragraph 60)

19.The UK has shown strong leadership on anti-corruption, particularly over the last six years, but recent revelations such as the Panama Papers show how far the UK needs to go to effectively tackle corruption both in the UK and overseas. It is essential that momentum is not lost in the wake of the decision to leave the European Union, when laws, regulations and trading arrangements are reviewed. (Paragraph 63)

20.In advance of its negotiations to leave the European Union, the Government must consider the ramifications of the UK’s exit on the laws and regulations designed to curb corruption both here and overseas, such as the provisions on extractive industries transparency included in the EU Accounting Directive. The Government must ensure that tackling corruption is not deprioritised as we negotiate our European exit and that the momentum to tackle corruption, and the alliances the UK has made with a number of other European countries in this regard, are not lost. We would encourage the Government to continue to use its influence with other European countries to encourage them to commit to publishing country-by-country reporting data for multinational enterprises, as it is now permitted in the UK. (Paragraph 64)

21.Strong leadership will be essential to tackling global corruption. We commend the leadership shown by the former Prime Minister, Rt Hon. David Cameron, on tackling global corruption and the positive contribution this has made to shift the global conversation. However, we recognise that comprehensive follow-up action is now needed. We hope that the new Prime Minister, Rt Hon. Theresa May MP, will continue to put anti-corruption measures at the forefront of the Government’s agenda and that this will lead to tangible policy changes across Government. (Paragraph 67)

DFID’s anti-corruption work

22.We welcome the introduction of DFID’s anti-corruption country strategies, following ICAI’s 2013 review. However, corruption is complex and deep-rooted and requires longer-term planning and commitment if it is to be addressed properly by DFID in the countries where it is working. The evidence presented to us strongly indicates that the five year plans proposed by the Government, although longer than the previous three year plans, are insufficient. (Paragraph 74)

23.DFID’s future anti-corruption country strategies must cover a minimum timescale of ten years. Individual projects of three to five years may be undertaken as part of—but not in isolation from—a longer-term strategy. We understand the limitations presented by our five year political cycle in the UK and the need to monitor results and ensure value for money. However, this should not prevent an overarching country strategy from covering a ten year timescale. These strategies could retain enough flexibility to adapt to changing political and economic environments, and to allow for the kind of innovative and adaptive programming that is necessary to combat corruption, whilst ensuring a long-term financial and institutional commitment to tackling corruption in partner countries. (Paragraph 75)

24.Other Government Departments (OGDs), aside from DFID and the FCO, are increasingly working in developing countries and using ODA to fund their activities. It is essential that the approach towards tackling corruption in any particular country is coordinated and coherent across all UK Government activity. We therefore welcome DFID’s commitment to producing enhanced anti-corruption country strategies which involve all Government departments. Given the increasing presence of OGDs in countries where DFID has bilateral programmes, it is essential that the Government’s approach is coordinated and coherent and that all officials are pulling in the same direction in their efforts to combat corruption. (Paragraph 79)

25.We understand that political events, including the EU referendum and the Government reshuffle, have led to the delay in publication of the new anti-corruption country strategies. However, we are concerned that allowing domestic political changes to stall the release of important strategy documents for six months will have had an adverse effect on in-country programming, preventing country offices from progressing vital work. (Paragraph 81)

26.DFID must publish its anti-corruption country strategies, alongside its overdue internal reviews and individual country plans, as a matter of urgency. Allowing vital policy documents to be stalled for so long is disappointing and risks hampering its efforts to tackle corruption in its priority countries, to the detriment of the countries it supports. (Paragraph 82)

27.It is clear that more research is required to establish ‘what works’ when attempting to tackle corruption in partner countries. We therefore welcome DFID’s considerable recent investment in the Anti-Corruption Evidence (ACE) programme. (Paragraph 86)

28.Alongside other donors engaging in anti-corruption work, DFID must allocate appropriate resources to establishing the effectiveness of its work in this area. Linking experience from country offices with its ongoing research will be crucial, as well as supporting new and innovative ways of working. (Paragraph 87)

29.DFID has already invested in significant research into anti-corruption efforts. However, it must ensure that where research is being carried out, particularly but not exclusively where it is funded by DFID, its findings are being effectively fed back into the work it is conducting on the ground. DFID must ensure that it references relevant research and clearly shows the evidence base for the planned approach in each country when it publishes its new anti-corruption country strategies. (Paragraph 88)

30.DFID has committed to spending 50% of its budget in fragile states. In these countries, attempts to tackle corruption must be considered very carefully. Evidence to us has strongly suggested that anti-corruption efforts can have adverse effects in unstable situations. We welcome DFID’s understanding of these challenges and its approach to ground its work in broader state and peace-building processes. However, when DFID is committed to spending half of its budget on fragile states, this may limit the volume of anti-corruption work it is able to carry out. (Paragraph 91)

31.We welcome DFID’s innovative approaches to thinking and working politically, which evidence suggests is vital when working to tackle corruption in its priority countries. (Paragraph 94)

32.Thinking and working politically has proven to be a useful approach for DFID in Nigeria. DFID must ensure that lessons are being shared between country programmes, and that research in this new and innovative area is disseminated, to ensure that all in-country staff are equipped with the resources and information to start considering similar ways of working that are sensitive to the political context. (Paragraph 95)

33.A compelling business case that clearly shows the economic benefits of improving a country’s credit rating by improving governance and tackling corruption may encourage more of DFID’s partner governments to take action. Highlighting the link between transparent governance and anti-corruption measures, and increased investment and lower borrowing costs could encourage more governments to take action. We are pleased to hear that the Royal United Services Institute (RUSI) are already in discussions with DFID staff about how best to use this approach in its priority countries. (Paragraph 104)

34.As representatives and legislators, parliamentarians have a crucial role to play in exposing corruption and legislating against it and this is an area which is often neglected by DFID. Strengthening the capacity of parliaments and parliamentarians can only ever be part of a broader strategy to tackle corruption and the approach must be tailored to the context. However, it is important that DFID recognises the importance of legislatures and legislators in the fight against corruption and considers their role when designing each of its anti-corruption country strategies. (Paragraph 107)

35.DFID must fulfil its commitment to include parliaments in its new anti-corruption country strategies, highlighting the role they will play in efforts to curb corrupt activities in its partner countries. We look forward to seeing this when the new anti-corruption country strategies are published. (Paragraph 108)

36.Civil society has a vital role to play in anti-corruption efforts and the availability of data is essential to empower citizens to hold perpetrators to account. Civil society activists and journalists who may come forward as whistleblowers exposing incidences of corruption must also be protected, but there are concerns that in many countries the space for individuals and organisations to speak out is closing. (Paragraph 113)

37.DFID and the FCO should work with governments in its priority countries to encourage greater protections for whistleblowers, including through legislation. The UK Government must also ensure that it has sufficient protections and mechanisms in place for whistleblowers that come to officials in overseas posts with evidence of corruption. The Government should lay out these processes clearly in its response to this Report. (Paragraph 114)

38.DFID should also acknowledge that civil society has a vital role to play in anti-corruption efforts and outline how it will engage with local civil society actors in its forthcoming anti-corruption country strategies. (Paragraph 115)

39.The evidence suggests that measuring the success of anti-corruption programmes is immensely difficult as it is difficult both to measure results and to attribute results to any particular intervention. (Paragraph 119)

40.As it is difficult to measure results, and there is still insufficient evidence to determine ‘what works’ in its anti-corruption interventions in its priority countries, DFID needs to ensure that it allows flexibility in its anti-corruption reporting frameworks to ensure that responses to corruption can be innovative and adaptable. Whilst it is crucial to ensure value for money, anti-corruption programmes involve inherent risk and the outcomes of the programme may not always be as expected. DFID must find ways to ensure it is monitoring progress, whilst not constraining programmes to a very specific set of results. DFID should include details of its monitoring frameworks in its new anti-corruption country strategies. (Paragraph 120)

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18 October 2016