Scott Hanson, director of policy and global engagement at the International Federation of Accountants, talks about accountants' role in fighting economic crime worldwide, and the federation's new
Transcription:
Michael Cohn: (
Hi, welcome to Accounting Today's podcast series, On the Air. This is Mike Cohn of Accounting Today. We're joined today by Scott Hanson, director of policy and global engagement at the international Federation of accountants. Welcome Scott.
Scott Hanson: (
Hello, Michael. It's uh, great to be here. Um, again, my name is Scott Hanson and I lead our anti-corruption and economic crime work at IAC as well as our engagement with international organizations. And I also, uh, oversee our capacity building program. So again, it's a pleasure to be here talking to you today.
Michael Cohn: (
Oh, it's good to have you with us today. I appreciate it. Well, um, we're gonna discuss the, uh, uh, recently released, uh, anti-corruption action plan, uh, from IAC, uh, for fighting economic crime. And could show me a little bit about this, uh, plan and, and what, what it entails, what are some of the, uh, key points in it?
Scott Hanson: (
Uh, sure, of course. Uh, so again, I'm here today to talk about a major new initiative that we have, uh, at IAC, uh, the international Federation of accountants, our anti-corruption AC uh, action plan or by its full title IACS action plan for fighting corruption and economic crime. And, and as I was thinking about my, uh, our conversation today, uh, I thought it would make sense to really jump in before getting to any of the history, any of the context of the purpose. I thought it would make sense to just jump into some, one of the key actions for the action plan, uh, that we're going to be launching over the coming months. Uh, so I wanna highlight four actions from this anti-corruption action plan. First, we're going to be reviewing the extent to which corruption and money laundering topics are covered in accountancy education worldwide.
Scott Hanson: (
Uh, the goal here is to start an evidence based conversation about whether any changes need to be made to better integrate these topics into accountancy curricula, or if there's opportunities to exchange best practices. Uh, so that's one of the first key items for the anti-corruption action plan is our accountancy education review. Second, we're going to launch, uh, another review of anti-corruption corporate reporting by large listed companies worldwide. And the idea here is to understand what companies are reporting, what topics are being covered, which standards are being used and whether and how that information is being assured. Uh, when you look at both the G and the SASB standards, uh, those are two of the main, uh, uh, sustainability related frameworks for reporting for corporate, uh, issuers. Both of them have anti-corruption provisions. So we wanna look at how those provisions are being used, uh, or not being used and understand the evidence there to start a conversation about anti-corruption reporting by companies.
Scott Hanson: (
And this builds off of Iffa state of play work on sustainability assurance, uh, with which many of your listeners, uh, may be familiar. Third, we are about to launch a new round of donor funded capacity building projects focused on developing accountancy capacity in the public sector. Now, these projects are being funded by the global vaccine Alliance Gavi and the global fund, as well as U S a I D. We have pilot projects in Ghana and in Berkin Faso set to launch in September and expect to broaden these programs, uh, into more countries in due course. And finally, the fourth action, I wanna highlight from the action plan, uh, to start, we are developing a domestic engagement toolkit for professional accountancy organizations around the world. The idea here is to encourage PAOs professional accountancy organizations, uh, and prepare them to reach out to key stakeholders in their countries and put themselves at the center of their local anti-corruption conversation. Um, so those are just four of the key actions from the action plan, really touching on a number of different areas, education, corporate reporting, capacity, building, uh, local engagement. And there are over 30 actions in this action plan. So that gives you a sense as to the scope of what we're doing, how we're trying to affect change in this space and, and what this action plan is all about. So hopefully those examples will make the rest of our conversation a bit more concrete rather than just abstractly talking about an anti-corruption action plan.
Michael Cohn: (
Um, yes, yes. That explains it very well. Um, and in addition to all these actions, I, there also seem to be several pillars in the plan. Um, and I was wondering if you could talk, uh, about what accountants can do specifically to health safeguard against, uh, corruption, um, in, uh, uh, the companies that, that, that they work with.
Scott Hanson: (
Sure. So the action plan is organized into five separate pillars. Uh, the pillars are harnessing the full potential of education and professional development, supporting global standards, contributing to evidence based policy, making, strengthening our impact through engagement and partnership and contributing our expertise through thought leadership and advocacy. Now, these pillars, uh, create a framework for us to think about individual actions and then how we can support an anti-corruption ecosystem more broadly. So at the start, I mentioned that we have over 30 actions in this action plan, and those are allocated out over those five different pillars. Now it's an important point to, to emphasize that the goal of the action plan is not to singlehandedly solve the problem of corruption. Uh we're we're not so naive to think that I fact, as the global voice of the accountancy profession can set out an action plan and, and now we've solved corruption.
Scott Hanson: (
Obviously that's not the case. Um, the purpose of this action plan and organizing it into these pillars is, is to really answer the question, how can IAC and then the profession, accountancy profession, more broadly support an ecosystem for fighting corruption and economic crime. So these are the ways these five pillars are the different perspectives at which we've thought about. And we've come to the conclusion. These are ways we can support, uh, the fight against corruption, uh, from a broad perspective. So having this framework, these five pillars, the anti-corruption action plan, it does several things for us. First, it provides a framework for inspiring new actions. So those four actions I led with all of those are new initiatives that IFAC will be launching over the course of the coming months, but it's also a way to reconsider or expand things that we already do to put them into context or, and think about how they can be part of the fight against corruption. And then together having this framework helps us think about fighting corruption in an interconnected way and more important. And just as importantly, helps us tell the story of what the profession does and how we're on the side of good in the fight against corruption.
Michael Cohn: (
Oh, that sounds great. Um, do you think the accounting profession, isn't a good position to, to fight against economic crimes and, and corruption, uh, whether it's in the private sector or the public sector?
Scott Hanson: (
Uh, sure. And, and that's an important question and I, I think the answer is a resounding yes. Um, so a good place to start there is who we are at IFAC and, and what the professional accountancy sector looks like. So Iffa, of course we're a member organization. We have about the 180 member organizations, uh, across 130 different jurisdictions and taken together. We indirectly represent over 3 million professional accountants. And it's important to remember how broad that reach of professional accountants really is, uh, within public practice. So firms of all sizes from the big four down to individual practitioners, within companies, as the finance function, as the CFO or the chief value officer within the public sector, uh, at all different levels of local, uh, provincial state or national government professional accountants are everywhere. And importantly, they're both on the private sector side and on the public sector side.
Scott Hanson: (
Uh, so there's an incredible reach there, uh, making professional accountants, an incredible lever in fighting corruption. Now there's an organization called the bosal Institute of governance, uh, which one is one of the lead thinkers, uh, of a concept in an agenda called collective action. And what collective action really is simply put, it's the idea that to fight corruption effectively, you need cooperation from both the public sector and the private sector and professional accountants being on both sides are in an incredible place to push that forward, to be allies for collective action, to be allies in fighting corruption. So all of that was just a comment about the reach of the accountancy profession, but justice importantly, is the skillset. And in terms of professional judgment, forensic skills, uh, you know, professional financial management use of, uh, of audit, uh, uh, professional standards, all of these things together make accountants well placed to actually do the work of, of identifying instances where corruption is potentially happening. So to answer your question again, very simply, yes, professional accountants are very well placed, uh, to be, uh, working, uh, on a daily basis in all of their different capacities to fight corruption.
Michael Cohn: (
Oh, that sounds great. Well, we're, we're going to pause for a brief message from our sponsor and we'll be right back with Scott Hanson from IAC. Hi, um, we're, we're back with, uh, Scott Hanson from IAC who's discussing, uh, the, the recently released, uh, uh, action plan, uh, for, um, fighting, uh, corruption in economic crime. Uh, uh, could show me a little bit about, uh, how this, uh, action plan, uh, was developed, how it evolved.
Scott Hanson: (
Uh, sure. Uh, so an important, uh, point to make here is IAC strong relationship with the international bar association and an initiative from the IBA. The, the international bar association is really where this, uh, took its inspiration. Uh, the IBA about a decade ago, launched an initiative called the anti-corruption strategy for the legal profession. And what was unique about this is that it took the issue of corruption holistically and thought about the different ways that the legal profession can support the fight against corruption, and then brought this all together, uh, in a single package. So this was very much our inspiration. What can I fact do to replicate the success, this framework for the accountancy profession? And once we got that conversation started with our stakeholders, it took on a life of its own. And here we are, uh, seven, eight months later with Iffa anti-corruption action plan.
Scott Hanson: (
Now, one of the key steps on this journey was at the IAC chief executives forum back in February of 2022. And this is the in many ways, highest level event on IACS annual calendar, where we bring together the chief executives of our largest member organizations for big picture discussions. Uh, I like to joke that this is like the IFAC Davos. So as part of that program, we have a discussion with three of the leading organizations in this space, uh, the financial action task force or the FADAF, which is the global anti-money laundering standard setter, uh, the organization for economic cooperation and development, the O E C D, which is a leading global policy body and the world economic forum, you know, the actual Davos people, um, and their partnering against corruption initiative. And the purpose of this discussion was to understand how these global stakeholders perceive the profession and what they expect of us.
Scott Hanson: (
And to be honest, the feedback, uh, was definitely what you would call mixed. Now, both the fat and the O E C D have prominent publications that don't necessarily paint the profession in the best light. Uh, the conclusion of this discussion were twofold, firstly, that we can and should do more in this space. And then second that we also need to do more in terms of getting the message out about what the global accountancy profession already does to fight corruption and economic crime, to reinforce the idea that we are the good guys. In addition to that, there's a second point that's important to make. And this is really more from a macro perspective. It's the growing understanding of the link between corruption and economic crime on one hand and the sustainability agenda on the other hand. And I should really say that negative relationship between the two Iffa has upped our engagement in sustainability over the past several years, uh, in sustainability reporting in particular and, and many behavior listeners are probably aware of this, but when you look at the United nations sustain, uh, sustainable development goals, or the UN SDGs, uh, that we hope to achieve by 2030 corruption and economic crime are impediments to all of them, whether that's access to clean water, access to education or reduced poverty, all of them, uh, the United nations estimates that five to 7 trillion of investment are needed annually annually to reach the SDGs and every dollar that is diverted or stolen slows us down.
Scott Hanson: (
And the world economic forum, for example, estimates that in 20 18, 3 0.6 trillion were lost to corruption. And, and that was before COVID. So when you think about the cost of five to 7 trillion needed to achieve sustainable development, and 3.6 trillion lost to corruption, that's half or more than half, um, of the, the, the funds needed to atta attain sustainability. So that gives you a sense of the importance and the gravity of fighting corruption. So you take all those things together, the inspiration from the IBA and their legal professions, anti-corruption strategy hearing from key international organizations that the accountancy profession and IAC needs to do more to get the message out and needs to do more, to contribute to the fight against corruption. And then this growing understanding that corruption and economic crime are probably the most important, uh, impediments to sustainable development. You bring that all together, and that's really the motivation behind our anti-corruption action plan.
Michael Cohn: (
Oh, and you mentioned about, about, um, getting the message out and I, I know, uh, uh, Iffa is involved with education setting education standards for accountants. Um, what, what kind of role does education play in, in this, uh, uh, action plan in this strategy?
Scott Hanson: (
Of course, in, in the, the simple answer there is education is critical. Uh, like I mentioned from the start, one of the key actions, if not the key action from the action plan is assessing the level to which corruption and money laundering concepts are already integrated into accountancy education, and then taking that data and seeing what we need to do, uh, to potentially change that situation. But education is, is sort of far beyond that. Um, one IFAC, for example, produces educational materials on our own, uh, and also in conjunction with partners. Uh, we have things on the ISPA code. We have things on, uh, anti-money laundering standards, um, and this broader resources on our knowledge gateway. So continuing to, to create educational resources like that, to help contribute to the discussion, um, or, or agenda is, is an important goal for us. Also, when we talk about public sector capacity building, which I also mentioned at the beginning, a significant portion of that is focusing on developing the education programs, uh, and frameworks in countries around the world to bring them up to global standards to better integrate, uh, not just sort of the highest level of accountancy skills, but also to integrate these important concepts like fighting corruption and fighting money laundering into education.
Scott Hanson: (
Um, so in short education is really fundamental. That's why it's the first pillar, uh, of this anticorruption action plan. And as the anticorruption lead at IAC, I'm working very closely with our education lead, uh, to make sure that this, uh, this initiative is a success.
Michael Cohn: (
You mentioned about the anti Mundy money laundering. There there's been a, a lot more attention paid to that, um, uh, with the growth of cryptocurrency and the use of, uh, crypto to, uh, LA funds, um, uh, more or less under the radar or, or at least, uh, the, the, the criminals, I think it's under the radar, um, though it's being ferreted out anyway. But, um, but, uh, what, um, uh, kind of, uh, strategies or, or actions can, can accountants pursue to, to good out this money laundering that's occurring, uh, whether it's in governments and the private sector, um, you know, uh, within crypto,
Scott Hanson: (
Okay. Uh, money laundering is, is so fundamental to the entire economic crime and corruption story, uh, for one very good reason, all money that's stolen or the proceed of crime, or the proceed of corruption, doesn't matter where it comes from, whether human trafficking, drugs, uh, wherever the source of funds corruption in particular for, for this case, all of that money has to be laundered. It has to be reintegrated into the legitimate financial system to be useful in any way to the criminals. And that makes it such an important access and sort of interdiction point for not just law enforcement, but for accountants as well. Now, overwhelmingly accountants around the world are subject to domestic anti-money laundering regulations and compliance requirements. And those continue to increase over time. Uh, as the financial action task force standards are, are brought into place, but it's important to remember that when accountancy education was initially developed, the extent to which accountancy, uh, was included in the global anti-money laundering framework was very limited.
Scott Hanson: (
And that has changed rapidly over time over the, the, the, the recent over recent years. Um, so part of this exercise is making sure that accountancy education has stayed current with the radical changes to the global anti-money laundering framework that have happened over the past 20 years, in terms of your specific question around cryptocurrencies. Um, it's important to remember how limited the cryptocurrency money laundering situation is. Although it's significant in, in many areas, overwhelmingly money laundering happens the old fashioned way, uh, with cash, uh, with bank accounts with that are, that are cleaned, um, not using cryptocurrencies real estate transactions, uh, you know, privately private companies with, uh, hidden beneficial ownership, the traditional money laundering techniques. And although the financial action task force recommendations continue to put pressure on all of those traditional techniques where there's a will there is, is oftentimes unfortunately a way and criminals do stay ahead. It's important that professional accountants understand these anti-money laundering compliance requirements and regulations and embrace them enthusiastically. So that professional accountants can be, uh, part of the tool against, uh, stopping money laundering and thereby, uh, reducing, uh, the incentives for corruption in other crimes.
Michael Cohn: (
Oh, you mentioned about, uh, IBA and some of the standards there. Um, what, what role can the accounting and ethics standards from Iffa play and, and combating corruption and economic crimes?
Scott Hanson: (
Of course, there, there's two very important things to highlight in terms of the, uh, international ethics codes for accountants, um, and its role in the fight against corruption and economic crime first are just the fundamental principles themselves, uh, and the importance that professional accountants play while being ethical in driving ethical conduct within organizations, and, and that can't be underestimated or, or understated the importance of professional accountants within companies and acting as advisors bringing those ethics into transactions and cultures more generally, but also very important to point out is the importance of the Noar provision, uh, the non-compliance with laws and regulation standard, uh, that was adopted by ESBA, uh, I believe four years ago at this point, this is revolutionary, um, and is effectively a whistle blowing obligation, uh, for professional accountants, uh, in, in our conversations with the international bar association, this is something they found extremely interesting and extremely inspiring.
Scott Hanson: (
And the idea there is can there be something learned for the legal profession to take on board from, from, from Noar? Um, and it's, it's the history of it it's journey in adoption, uh, with IBA, and now it being in practice next year in 2023, there's going to be a five year implementation review of the nocar provision. And one of the actions in our anticorruption action plan is engaging with that review, using it as a launching point for doing more, to get the word out about nocar supporting its adoption in the, the markets in the jurisdictions where it has not been adopted yet, and using it as a launching point also for advocacy around the need for strong whistleblower protection legislation, and then implementation of that legislation. So that's all to say Aasbo code extremely important. Um, for the anti-corruption discussion, it figures very prominently into the action plan, um, and the 2023 nocar, uh, post-implementation review, uh, is something that's going to be central, uh, to the action plan in specific.
Michael Cohn: (
Oh, great. Well, well, it sounds like, like things will be developing next year as, uh, IFAC pursues, these developing these, these standards and doing post-implementation reviews and, uh, this new action plan sounds like it's has a lot of great aspects to it. Uh, well, um, I wanna thank, uh, Scott Hanson of IFAC for, uh, being a guest on our podcast today, this episode of On the Air was produced by Accounting Today with audio production, by Kevin Parise, please rate, review us on your favorite podcast platform and see the rest of our content on accountingtoday.com. Thanks again to our guest Scott Hanson of IFAC, and thank you for listening.