According to a recently issued report by the Institute of Chartered Accountants in England and Wales (ICAEW) Financial Faculty, “A lack of transparency on decisions damaged public confidence.” The document, “Enhancing the Dialogue between Bank Auditors and Audit Committees”, says there should be more public access to details of accounting judgments challenged by the audit committee and that key decisions should be published in banks’ annual reports.
Its recommendations include: (i) Considering the extent to which the objectives of the auditor, audit committee and management are aligned for annual reporting activities; (ii) Balancing the level of co-operation and challenge accordingly; (iii) Making any challenge and debate that has taken place more transparent, by including details in the annual report on key accounting judgments challenged by the audit committee, and debates between the auditor and audit committee, as well as auditor and executive management; (iv) Considering in the light of risk; and (v) Planning for an efficient year-end.
Ed Milliband, the British Labour leader (Opposition), was on Bloomberg recently and he called for “a new code of conduct for bankers. Anyone who breaks the rules should be struck off.”
Before emptying the Treasury
Within a matter of hours, the Treasury issued the following statement as “Breaking News” on Al Jazeera: “Her Majesty’s government considers that recklessness would be the appropriate basis for a new criminal offence for misconduct in bank management.”
Mark Hoban, financial secretary to the Treasury, was emphatic in his declaration: “The government is committed to tackling the legacies of the financial crisis and implementing most far-reaching reforms of British banking in our modern history.
“Because of the serious consequences that a bank failure can have on the economy and taxpayers, we are also consulting on whether to extend the criminal law to cover serious misconduct in bank management.
“We acknowledge that it will be difficult to draw up a definition of recklessness that gives business sufficient freedom to take risks and make legitimate mistakes.
“However, creating a new criminal offence involving recklessness would send a clear signal that society – which might have to pay a heavy price for dealing with the consequences of recklessness – is determined to prevent and deter that conduct.
“At the very least, it would surely make bank directors think twice before taking certain decisions. Of course, the Treasury is aware that bank executives may already face sanctions from regulators for negligence or incompetence, for example, by refusing to approve them to hold a senior position. Regardless, we recommend that it is necessary to go much further to stop the rot, because of the egregious character of reckless banking.”
Bend it like David
The British Prime Minister David Cameron also issued an official statement on C-SPAN: “I, along with George Osborne, the Chancellor, together with Ed Milliband, the Labour leader, and Ed Balls, the shadow chancellor, have agreed to set up a parliamentary commission on banking which will recommend how to improve banking standards and culture, following the scandalous and totally unacceptable revelations of the manipulation of Libor rates by Barclays Bank. Specific penalties have not yet been tabled but we are not ruling out jail sentence for recklessness.”
Whistle blowing at the World Bank and IMF
At a recent joint World Bank/IMF meeting in Tokyo, the theme was “Quis Custodiet Ipsos Custodes?” (Who Guards the Guards?) The Dalai Lama insisted that each country should name the auditors of all its banks as well as the auditors of the regulators. How strange that it was only in Zimboda (and probably in Nigeria) that all the banks are being audited by only four firms, and the same auditors audit the regulators!
To make matters worse, the Dalai Lama alleged that regardless of the prohibition of large audit firms from providing consulting services (following the Enron scandal) and the insistence of the American and British regulators that the largest audit firms should divest from their consulting practices, the audit firms have found a way round it – by selling off their consulting practices while extending their audit practices to cover “corporate finance” and “transaction services”. Clever!
The Dalai Lama was incandescent. He distributed a long list of certain auditors who, in total disregard of conflict of interest, provide consultancy services to the very same clients they are auditing. The Dalai Lama then delivered a quotation from Buddha: “One man wears many caps and soils them all.”
Beware of the virus
The Punch editorial of June 22, 2012 has gone viral on the internet. Headline: “ICPC’s Curious Alarm on Corruption”. It reads: “The alarm raised by the Independent Corrupt Practices and other related offences Commission that Nigeria could collapse under the weight of massive corruption is timely and serious. It has come at a time when Nigerians are beginning to wonder if corruption had ever been so pervasive, so blatant, and so potentially destructive in the history of this country.
“In countries where threats to national survival attract maximum attention, the ICPC warning would have galvanized both the citizens and government into action. There is no doubt that corruption in Nigeria has reached that level. But even when ICPC’s warning is supposed to shock the people out of their lethargy, nobody should expect any serious response because nothing shocks Nigerians anymore; not when it is a mere re-echo of what is already well known to everybody.
“What is, however, likely to be striking is the fact that this warning is coming from the ICPC, an agency charged with containing the rampant spread of corruption, but which has appeared clueless about the nature of its job. Since its establishment, through the ICPC Act of 2000, the commission has achieved very little. In fact, Nigerians only started feeling the impact of the war against corruption in 2004 when the Economic and Financial Crimes Commission came into existence.
“The then President Olusegun Obasanjo, having rightly identified corruption as a major factor in the country’s stunted development, had set up the two bodies to combat graft. Due largely to EFCC’s activities, Nigeria’s rating in the Transparency International Corruption Perception Index improved remarkably. From the position of the second most corrupt country in the world in 1999, the country moved to 121st out of the 180 countries surveyed by the global corruption watchdog in 2008.
“Sadly, all the gains have now been badly eroded; Nigeria now stumbles from one major corruption scandal to another. The situation has so deteriorated that it will be a miracle if Nigeria does not return to the very bottom in the next release of the Corruption Perception Index. Right now, the country occupies the 143rd position out of 183 countries.
“While Transparency International describes corruption as “an obstacle to progress”, which “causes instability in financial markets and entrenches poverty”, the Nigerian government does not seem to appreciate the danger posed by graft...
“So pervasive has corruption become that the presidential candidate of the Congress for Progressive Change and former head of state, Muhammadu Buhari, described the Goodluck Jonathan administration as the most corrupt in the history of the country. Many non-partisans Nigerians agree with this assessment.
“Corruption has thrived over the years because the country’s leadership shields corrupt officials. When the Halliburton Willbros and Siemens multi-million dollar bribery scandals broke, the people involved were tried and heavily punished in the countries from which the bribes originated. But the Nigerian recipients of the bribes walk the streets freely at home.
“The case of a former governor of Rivers State, Peter Odili, who obtained a perpetual court injunction against his investigation, arrest and trial, is still fresh in the memory; nothing has been done to vacate the obnoxious injunction. One also readily recalls that the first EFCC boss Nuhu Ribadu’s problem started when he arrested a former Delta State governor, James Ibori, said to be the chief financier of the late President Umaru Yar’Adua’s election. The same Ibori was acquitted of all charges of corruption in Nigeria but is now serving a 13-year jail term in Britain for the same offences.
“A few days before she was replaced, a former EFCC boss, Farida Waziri, accused Jonathan of lacking the political will to fight corruption, saying, ‘First, there must be a political will to fight corruption. When the chips are down, the essence of political leadership is to provide direction for policies and to provide requisite anti-corruption structures.’ This, she claimed, the government had not done. This is why the Human Rights Watch lamented last year that there was no high profile corrupt person in any Nigerian prison despite the so-called war against corruption.
“The need to set up special courts for trial of corruption cases should be given speedy attention. At the same time, both the EFCC and ICPC must show that they do not exist merely for decorative purposes by successfully prosecuting their cases instead of a situation where they present shoddy cases, leading to such cases being struck off by judges. Nigeria must show seriousness in prosecuting the anti-corruption war.”