Corporate Ghana Must Respond to FinCEN Leak by Improving Anti-Corruption Disclosures

The best way corporate Ghana should respond to the leaked #FinCENFiles is by taking action to mitigate the risk of promoting or facilitating corruption, money laundering and financial crime in Ghana.

For the past couple of days, I have been checking various news portals to see if I could find a comprehensive response from corporate Ghana and government institutions on the recent leakage of the Financial Crimes Enforcement Network (FinCEN) Files ^[1] which caught attention across the world.

In Ghana, responses are slow and not much action has been taken except for the sole battle that few journalists are fighting to broaden the discussion on the issue. This is unexpected in a country where corruption continues to be a topical national problem, the political leaders making anti-corruption a key campaign message and in recent times, secessionist groups are emerging. The leaked documents should draw the attention of stakeholders to make efforts to further mitigate corruption in Ghana.

Corruption is a multi-stakeholder problem that needs a multi-stakeholder combat strategy, and corporate Ghana should play its part. GRI 205: Anti-Corruption ^[2], notes that corruption includes practices such as bribery, facilitation payments, fraud, extortion, collusion, and money laundering; the offer or receipt of gifts, loans, fees, rewards, or other advantages as an inducement to do something that is dishonest, illegal, or represents a breach of trust.

Ghana in the Limelight
Ghana losses about US$3 billion annually through corruption ^[3] and the negative impact of this on the development of the country cannot be overemphasized.

Corruption is not only a public sector problem but the private sector is also complicit if not the vehicle through which corruption is facilitated. If the entities are committed to mitigating corruption in Ghana, they must as well be committed to disclosing their anti-corruption efforts as part of corporate reporting.

Corporate Reporting in Ghana
Ghanaian firms are slacking when it comes to corporate disclosure in general. From the largest institutions to the smallest institution, you will not find enough disclosures that match the situation in South Africa, for instance. The causes are linked to the ineffectiveness of our institutions, as well as, the level of activism by our practitioners, policymakers and the educational institutions.

The current situation where the requirements in other jurisdictions are the main drivers of quality corporate disclosures by mostly subsidiary firms operating in Ghana has led to a porous national corporate reporting system and weak reportage among indigenous firms. This is replicated in the extent of adoption of global reporting standards.

Only a few firms in Ghana have adopted global reporting frameworks like the GRI Standards, Integrated Reporting Framework and the SASB Standards for instance. A scan through the reports of companies listed on the Ghana Stock Exchange shows that not many companies are applying these reporting frameworks and the majority do not disclose on their anti-corruption efforts.

Corporate Responsibility and Anti-Corruption Disclosures

Corporate organisations have to be responsible citizens if we have any regard for global calls for sustainable development. The corporate world has a shared responsibility to ensure that it does not originate, facilitate or support avenues for corruption which eventually have negative economic, social and environmental effects on the country.

Anti-corruption strategies can range from stringent legal actions to voluntary actions like corporate disclosures and both are relevant tools to mitigate the risk of corruption. The latter is the most sustainable choice for corporate organisations, investors, analysts and the entire economy.

A recent study examined the anti-corruption disclosure of mining and energy sector in Africa which found the extent of disclosure to be low even among large firms ^[4]. The study posits that disclosure is driven by the corporate boards and the C-Suite executives at the firm level. At the national level, the corruption perception and human development (incl. education) drive the firms to disclose their anti-corruption efforts. Moreover, there are some sector-specific, country-level and global forces that drive disclosure, which is Extractive Industries Transparency Initiative (EITI) membership and the membership in the United Nations Global Compact.

The study suggests a multi-stakeholder approach as the best way to win the anti-corruption fight. This is in line with the Sustainable Development Goal (SDG) 17 which highlights the need for Global Partnership while anti-corruption initiatives fall under the SDG 16.

Ghana in the FinCEN Files
Many financial crimes and corrupt activities happen at the blind side of regulatory bodies in Ghana, which is a reason to demand much sophisticated and more punitive measures to deter those involved.

Thanks to the FinCEN, we have an idea today about the suspicious activities in the gold industry which were allowed by the financial sector. The Ghanaian cases of suspicious activity reports (SARs) as part of the FinCEN Files have already been vividly reported ^[5] and need no rehash.

Yet, it must be noted that the incidence of corruption in Ghana transcends the gold industry and the banks are not the only channel to process illicit financial flows.

The Call to Action
Against these backdrops, corporate Ghana needs to be deeply involved in the fight against corruption. This can be done by a multi-stakeholder approach that involves the companies, the auditors, the regulatory bodies, the government, civil society and the entire citizenry in putting controls to deter corrupt activities. Corporate anti-corruption disclosure is one of the tools which increases transparency and shows the commitment to combating corruption.

The FinCEN Files expose the fundamental weaknesses in the anti-money laundering systems which needs a swift redress and actors in Ghana should take action.

The Bureau, FinCEN
FinCEN ^[6] is a bureau of the United States Department of Treasury which collects and analyses information to combat money laundering, terrorism financing, evasion of economic sanctions and other financial crimes. It was established by the U.S. Secretary of Treasury in 1990 and has since been operating domestically and internationally.

Financial institutions that suspect their clients may be involved in financial crime are supposed to file a report known as SARs with the bureau. In 2019 alone, over 2 million SARs were filed by the financial institutions to the bureau ^[7]. Yet, there are concerns about the lack of action by the financial institutions and governments in stopping those involved.

It is worth noting that a SARs may not necessarily mean there is evidence of money laundering, corruption or terrorist finance, however, the reports are typical evidence which can be assessed to determine possible financial crime activities.

FinCEN Files Leak
FinCEN Files is a recent exposé just like earlier ones such as the Panama papers and Swiss leaks. The FinCEN Files are leaked documents from the bureau which describes over 200,000 suspicious financial transactions which are valued to be more than US$2 trillion.

The exposed documents date from 1997 to 2017 and focus on many global financial institutions in more than 170 countries.

As regards the FinCEN files, the BBC has reported that “the world’s biggest banks have allowed criminals to move dirty money around the world” ^[8]. Also, Buzzfeed News posits that the leaked files offer an “unprecedented view of global financial corruption, the banks enabling it, and the government agencies that fail to stop it” ^[9].

References
[1] ICIJ (2020), “An ICIJ Investigation - FinCEN Files”, The International Consortium of Investigative Journalists. Available at: https://www.icij.org/investigations/fincen-files/

[2] GRI (2016), “GRI 205: Anti-Corruption 2016”, Global Reporting Initiative. Available at: https://www.globalreporting.org/standards/media/1006/gri-205-anti-corruption-2016.pdf

[3] Rahman, K. (2018), “Overview of corruption and anti-corruption in Ghana”, Transparency International. Available at: https://www.u4.no/publications/overview-of-corruption-and-anti-corruption-in-ghana-2018-update

[4] Duho, K.C.T, Agyenim-Boateng C., Asare, E.T. and Onumah, J.M. (2020) “Convergence and Determinants of Anti-Corruption Disclosure among Extractive Firms in Africa”, Journal of Financial Crime, https://doi.org/10.1108/jfc-06-2020-0109

[5] Dogbevi, E.K. (2020), “Ghana gold exporters in middle of suspicious $2.8b transactions tied to Kaloti and others”, CENOZO Investigative Reporting in West Africa. Available at: https://cenozo.org/en/articles/252-ghana-gold-exporters-in-middle-of-suspicious-2-8b-transactions-tied-to-kaloti-and-others

[6] FinCEN (2020), “Financial Crimes Enforcement Network”. Available at: https://www.fincen.gov/

[7] Leopold, J., Cormier, A., Templon, J., Warren, T., Singer-Vine, J., Pham, S., Holmes, R., Ghorayshi, A., Sallah, M., Kozyreva, T. and Loop, E. (2020) “The FinCEN Files”, BuzzFeed News. Available at: https://www.buzzfeednews.com/article/jasonleopold/fincen-files-financial-scandal-criminal-networks

[8] BBC (2020), “FinCEN Files: All you need to know about the documents leak”, British Broadcasting Corporation. Available at: https://www.bbc.com/news/uk-54226107

[9] BuzzFeed News (2020), “FinCEN Files”. Available at: https://www.buzzfeednews.com/fincen-files

Author
King Carl Tornam Duho is a research consultant, a qualified CIMA Chartered Accountant, and an ACCA (UK) finalist. His research aims to use data science, machine learning and artificial intelligence to solve complex accounting, economics and finance problems. He is a member of the Strategic Hub for Organised Crime Research (SHOC) at RUSI (UK). His research appeared in Journal of Financial Crime, International Journal of Managerial Finance, Journal of Economic Studies, International Journal of Banking Accounting and Finance, Afro-Asian Journal of Finance and Accounting, Asian Journal of Accounting Research, and Public Administration and Policy. Contact him at [email protected].