Maintaining the Public’s Trust
David Stevens, Integrity and Law Manager, ICAEW |
Accountants working in public practice are gatekeepers for the legitimate financial system, just as accountants working in industry are gatekeepers for the organization, a role sometimes demonstrated by robust discussions with business development teams, for example. Since accountants often occupy such important positions, it is important that we continue to maintain public trust, and IFAC's recent study demonstrates that the public’s trust is well placed. The profession is also increasingly relied upon by government and law enforcement agencies.
Accountancy is arguably the most complex and most diverse of the professions. There are a variety of understandings as to what constitutes accounting services. Much of an accountant’s work may well include an element of investigation, such as in audit, so there is great value in the contrasting and additive intelligence that can be gained from accountants.
The nature of anti-money laundering legislation in many countries makes it difficult to consider effectiveness in abstract, since money laundering cannot exist without a predicate offence. In this sense, the legislation responds to symptoms rather than underlying causes. Preventing corrupt funds’ movement can be compared to shutting the stable door before the horse bolts, but in an ideal world there is no horse in the first place.
Many firms are responding by taking a holistic approach to financial crime and anti-corruption efforts, focusing as much on the predicate offences as they are on money laundering itself. Accountants in public practice don’t tend to initiate or process transactions. Therefore, we might not generate the large volumes of data that, for example, the algorithmic monitoring software of a bank might. However, given the ongoing nature of our client relationships we are in a prime position to formulate useful intelligence.
This makes the collection and sharing of information with law enforcement a priority. When law enforcement share typologies it means accountants are better informed in their client due diligence, which otherwise has to be carried out armed with little more than a list of general risk factors. It is, therefore, important that professional bodies engage with law enforcement agencies where possible, and press for intelligence that facilitates proper application of the risk-based approach. This is something the Consultative Committee of Accounting Bodies in the UK (CCAB) advocates in our manifesto for fighting economic crime.
Government will often choose to address corruption with regulation (examples of such efforts include the US Foreign Corrupt Practices Act and the UK Criminal Finances Act). However, the 2017 Edelman Trust Barometer shows that three countries that have strong legislation—France, UK, and the US, arguably the highest profile anti-bribery legislation—also have the largest “trust gap” between general public and knowledgeable insiders. If trust is an enemy of corruption, then regulation may not be the answer. The answer perhaps lies in values and ethics.
As a profession we shouldn’t tolerate the phrase “culture of compliance.” A purely compliance culture tends to be rules-based, meaning the rule itself is the ultimate basis of decisions. People question how things can go so wrong in organizations with strong controls and cultures of compliance. But it is perhaps for that very reason: because compliance is the aspiration rather than the bare minimum standard of behavior.
In contrast, an ethical culture is values-based and those values underpin each rule or policy. Employees are expected to know and follow rules and policies; they are also expected to make a good faith effort to honor the spirit (i.e., purpose) of the rules as well as the letter. A culture of compliance will not create a culture of integrity, but a culture of integrity will go quite some way in fostering good compliance. The Institute of Chartered Accountants of England and Wales discusses the importance of, and processes for, instilling such a culture in its Real Integrity report.
Professional accountants have an edge when it comes to this kind of thinking as we have a long history of following and applying a code of ethics. And let’s not forget that, for professional accountants, the code of ethics can be a regulatory tool, not just a public relations exercise. Professional accountancy organizations also have a wide range of other mechanisms to encourage good behavior, including formal training, client money regulations, practice regulations, quality control programs, disciplinary procedures, and, most importantly in my opinion, a code of ethics. Furthermore professional organizations have an important role to play in fighting corruption and it is important to work collectively in this area, as illustrated by our united stance on corruption.
IFAC's recent study highlights another important point here. The positive effect of professional accountants in the economy is three times more strongly linked with lower corruption, compared with individuals identifying as accountants but who may not have professional qualifications. An issue for the profession is that in many countries a significant number of “accountants” are not members of professional organizations. For example, in the UK anyone can call themselves an accountant without any qualifications or training, and without joining a professional organization and being held to the organization’s standards & requirements. They will, therefore, not be monitored in relation to the quality of their work and will not be required to adhere to the Code of Ethics for Professional Accountants. To uphold the highest standards, which are required to tackle corruption, they should be subject to the same “robust ethical, educational, and oversight requirements.”
The term professional enabler is often misused to describe someone who is not necessarily professional but who has in some way helped an economic crime succeed (such as tax evasion, fraud or money laundering). We argue that the actions (or inactions) of these enablers are anything but professional. But accountants are nonetheless often included in the above category, along with lawyers, bankers and estate agents. That said a recent survey of citizens in G20 countries revealed that accountants are trusted when it comes to tax. What about the public’s perception when it comes to corruption more generally? Are we perceived as a force for good or a profession of enablers? If the latter, is that a fair assessment and what can we do about this? And where might the public think we are best placed to tackle corruption?