Investors won’t pay ‘corruption tax’

Fighting corruption is a global challenge that is placing a bureaucratic burden on small territories like the Cayman Islands. But according to the latest speaker at UCCI’s series of lectures on ethics and corruption, it may soon be more costly not to clamp down on shady operators. 
Former UK Attorney General Baroness Scotland explained why a zero tolerance approach may make sense financially as well as ethically.  

 

Increasing international intolerance of corruption represents an opportunity that the Cayman Islands can’t afford to ignore, according to former UK Attorney General Baroness Patricia Scotland. 

In a lecture at the University College of the Cayman Islands, Scotland urged Cayman’s leaders and wider community to embrace a zero-tolerance approach toward corruption. 

She said the payoff would be more than the warm glow of doing the right thing. Scotland believes developed countries have a responsibility to create a “new paradigm” where the advantage lies with those who play fair. 

She said the overseas territories, including the Cayman Islands, could be at the forefront of this new world order.  

Scotland is proposing a global set of standards that countries and territories can sign on to in order to provide comfort to potential investors that the “corruption tax” did not apply. 

“My central proposal in relation to the creation of an international kite mark, which would mean any country can sign up for international standards, is I think one of the ways forward. 

“We always hear people say, ‘I would like to be straight I would like to be honest, but no one else is you have to understand the realities of this business.’ 

“I think we need to create a new paradigm where the advantage will rest with those of us who are honest and straight because we will set a benchmark that says you cannot play in our market unless you adhere to the highest possible standards, thereby creating a positive incentive for compliance instead of a disincentive which tragically so many people believe adherence to the rule of law currently is.” 

Britain’s overseas territories, in particular, have much to gain from making it clear to investors that they operate according to the highest possible standards, she said. 

During a lengthy lecture to a crowd of politicians and dignitaries, including police Commissioner David Baines, head of the anti-corruption commission in Cayman, and Karin Thompson, who heads up the Commission for Standards in Public Life, Scotland made several references to the “opportunity” presented by increased global intolerance of shady business practices. 

On several occasions she alluded to the potential for increased investment by being seen to be clean. 

She said: “Investors are looking for clean safe harbors in which to invest, where the corruption tax is not present and where safe but good returns are possible and the risks to their capital are low.” 

Describing the advantages of the territory’s links with the UK, in particular through the Bribery Act, 2010, which also applies to British overseas territories citizens and has been hailed as a “gold standard” in the legislative fight against corruption, she added: 

“The territories are well-equipped given their historic and legal ties with the UK to exploit the benefits which the Bribery Act can bring in terms of increasing international investor confidence.  

“I believe it may be possible to create positive incentives to implement adequate procedures to promote best practice and to create an environment which is hostile to corruption.” 

Speaking later about the kite mark system, she added: “The territories can and, in my view, should lead the way.” 

Scotland warned that fighting corruption should not be purely left to legislators and emphasized that simply having an anti-corruption commission was not enough. 

“Creating a culture which is resistant to corruption needs an approach where every participant understands the impact of the acceptance or toleration of corrupt practices of those who may surround them. Silence is commission. 

“It’s a hard message and one which is often unpalatable to many who, innocent themselves of poor practice, would rather look the other way because challenge and confrontation is too difficult to contemplate. 

She said governments, too, need to step up with proper funding and legislative support. 

“An anti-corruption commission no matter how well structured and able cannot be and should never be seen as a panacea… 

“There are a number of features which are really important for anti-corruption commissions to have – independence, rigor, funding, expertise. Those elements are critical if anti-corruption commissions are to do their work. In my view, we should never substitute our own rigor and vigor and replace it simply with a commission. 

“A commission will only be as good as we make it – if we don’t give them funding, if we don’t give them power, if we don’t enable them to monitor the situation, then they will be forgiven for not making a difference.” 

Sounding a positive note, she concluded by urging Cayman to be part of a coalition of countries that refuse to tolerate corruption. 

“We need to create a virtuous uplifting cycle so that ethics and law work together to enable us to avoid future crises as those we saw across markets in 2008. 

“There are many things for us to fix. Not all of them are easy or straight forward, but I genuinely believe together we can make a difference and help to ensure the nature and cost of corruption is part of our past.” 

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Baroness Scotland addresses the audience at UCCI.

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