Acting as an international expert in the area of corruption and good governance for the Council of Europe – Directorate General Human Rights and Rule of Law, I have recently been given the honour of working within the project CLEP (Controlling corruption through Law Enforcement and Prevention), which aims at supporting the reform of the anti-corruption regulatory framework in the Republic of Moldova (the Republic of Moldova is ranked 117 out of 180 countries within the Transparency International Corruption Perceptions Index 2018).
In particular, through my contribution towards the preparation of a technical paper that will be formally presented in September to the national authorities, I advocated the adoption of two measures to innovate the Moldovan legal framework: the establishment of a public anti-corruption “white list” of virtuous companies; and the introduction of deferred prosecution agreements in the Moldovan jurisdiction.
The technical paper is planned to be officially published in Autumn 2019. In the meantime, I decided to write down some general reflections on the former proposal (establishment of an anti-corruption white list) that benefit from the research conducted for and the experience gained from such a stimulating Council of Europe’s mission.
First of all, it is necessary to briefly conceptualize the notion of “white list”. This concept is antithetical to the one of blacklisting (also known as debarment), which is commonly used in the public procurement process and consists of excluding the blacklisted party – permanently or for a given period of time – from the participation in the related public procedures.
On the contrary, an anti-corruption corporate white list may be defined as a roster including private-sector entities that meet the requirements for a series of anti-corruption criteria that go beyond the mere compliance with the mandatory anti-corruption regulations. In particular, to be included in a white list, companies should voluntarily commit to the establishment of corporate strategies and procedures aimed at effectively identifying and preventing potential corruption risks. Moreover, these firms should agree to be subject to an independent and external assessment of the effectiveness and correct implementation of such systems.
Historically, white lists of firms have been established in many countries and for different purposes. For instance, one of the first examples – within the private sector – was represented by the establishment in the United States, in the early 1930s, of the white list of candy firms which maintained voluntarily a few minimum standards in relation to the quality of the products used and employees’ wages. In 1932, 102 firms were included in this so-called “Candy White List.”
Pressure for the implementation of such rosters is currently increasing especially as a tool to fight financial crime. According to such a trend, the idea underlying this article is to evaluate the opportunity to use a white list as a tool to counter the perpetration of corrupt practices. In this context, the proposal relates to a white list established by the public administration in cooperation with the private sector rather than consisting of a purely self-regulatory solution.
Due to the fact that the inclusion of companies in a white list is inherently voluntary, such an instrument has a symbiotic relationship with the establishment of a series of incentives for the companies. Rewards play a fundamental role in the successful establishment of a white list in a given jurisdiction because they serve as a crucial stimulus for businesses to accept the costs for the implementation of the additional anti-corruption procedures.
As regards the potential advantages related to the introduction of a white list, they could be included in two categories. The first one concerns the advantages that affect the country system as a whole and, among them, it is possible to mention the following ones:
- Due to the fact that other companies would naturally tend to follow the example of the white-listed competitors to gain the same level of enhanced reputation and take advantage of the incentives provided, the presence of the white list could inherently foster an anti-corruption culture both in the private and public sector.
- The white list could naturally enhance the relationship between the white-listed companies and the public administration generating a higher level of trust between the public and private sector.
- The white list could reassure international investors and donors making it easier to receive or compete for international funding opportunities.
- The anti-corruption strategies implemented by the white-listed companies could naturally lead to less intense controls from the public authorities so to allow the government to save crucial resources that could be used in other ways.
The second category is related to the advantages that the white-listed companies could obtain besides the incentives formally awarded by the public administration. It follows a list of illustrative benefits that such firms could enjoy:
- The public roster could inherently enhance the reputation of the white-listed companies, which would have the possibility to consolidate and expand their market shares generating increased customer loyalty.
- The circumstance that the white-listed companies would be publicly recognized as firms adopting a corporate culture with a commitment to integrity would inherently help them to counter corrupt practices (e.g., discouraging low-level officials to ask for the payment of petty bribes).
- The white-listed companies could use their status to find with less difficulty foreign business partners that would be reassured by their inclusion in the public roster.
Besides the advantages, the introduction of an anti-corruption white list may generate disadvantages that have to be identified and addressed in advance. As a matter of fact, there is no zero risk associated with the adoption of any new legal framework in a given jurisdiction. Over the course of this study I have identified three risks that could potentially be posed by the introduction of such legal instrument:
- Collusion Risk: The white list could be illegally used as an instrument of cooperation or conspiracy between corrupt government authorities or politicians and aligned private sector players in order to deceive others firms and obtain an unfair competitive advantage over them.
- Conflict of Interest Risk: Due to the fact that the companies that apply to be included in a white list should be subject to an external assessment of the adequacy of the anti-corruption strategies and policies they have implemented, an inherent conflict of interest could emerge where, for instance, those firms pay for such an assessment or where the interests of certain firms are aligned with the ones of some political groups.
- Exploitation Risk: The absence of adequate resources, skills, or political willingness may negatively affect the effectiveness of the controls on the adequacy of the anti-corruption strategies and policies supposedly implemented by the white-listed companies. As a result, there is a risk that some companies could merely simulate through window-dressing operation compliance with the eligibility criteria and the implementation of an effective anti-corruption compliance program.
In conclusion, the adoption of a white list could surely contribute in a constructive way to the establishment of a positive cultural change in the corporate world. However, the introduction of such a system to publicly recognize good corporate citizens may generate significant disadvantages where the implementation and management of the white list are inappropriately conducted (i.e., assuring an adequate level of monitoring, transparency, accountability, and independence). Paradoxically, the countries that experience higher levels of corruption seem more vulnerable to such potential drawbacks even if they are the ones in greater need of such a solution. In any case, it is important to clarify that the introduction of a white list of virtuous companies in a given jurisdiction cannot be considered as a panacea for the problem of corruption. Rather, it may represent an additional legal instrument for countering, in conjunction with all the other forms of intervention (e.g., prevention and repression) such a pervasive criminal phenomenon.