8 Gross corruption and other serious financial crime
Section 4 of the ethical guidelines states that: “Companies may be excluded or placed under observation if there is an unacceptable risk that the company contributes to or is responsible for: […]
- g. gross corruption or otherserious financial crime
8.1 Gross corruption
In 2023, the British oil service company Petrofac Ltd was placed under observation, while the Council’s observation of the South Korean construction company Hyundai Engineering & Construction Co Ltd (HDEC) and the Canadian private aircraft manufacturer Bombardier Inc continued. The Council recommends observation more frequently in corruption-related cases than in other cases. This is both because the norm violations generally occurred some time before they came to light, and because companies involved in corruption will often implement changes that prompt uncertainty about developments forward in time.
With respect to companies under observation, the Council examines how they are working with and developing their anti-corruption systems, and monitors whether allegations concerning new cases of corruption are revealed. If no new corruption cases emerge and the company seems to have put in place an anti-corruption system in line with internationally recognised recommendations, the Council normally recommends that observation be terminated. However, there is no guarantee that a company will not become involved in corruption once again. In that case, the Council can conduct a new assessment of the company.
The Council monitors allegations of corruption linked to GPFG-invested companies on an ongoing basis. Companies linked to multiple serious allegations of corruption are systematically logged, sorted by business sector and ranked with respect to level of risk. This overview is constantly updated and expanded. Within certain sectors, allegations concerning such a large number of companies have been identified that it is also possible to perform a more holistic review of them. In 2022, the Council performed such a review of nine companies in the telecoms sector, with one of these subject to a closer examination in 2023.
In 2023, an equivalent review commenced of 25 companies in what the FTSE defines as the “Construction and Materials” sector. This has long been highlighted as one of the sectors with the highest corruption risk in the world. A number of factors contribute to this. The projects, especially infrastructure projects, are often substantial. The construction of dams, power stations, industrial facilities and motorways can cost tens of billions of Norwegian kroner. It is easier to hide substantial bribes and inflate costs in large projects than in smaller ones. Furthermore, large construction projects are often more or less “customised”. This can make it harder to compare expenditures with other projects, which also makes it easier to inflate costs and hide bribes. Public authorities are also usually involved. Most large-scale infrastructure projects are owned by the authorities, and even when they are carried out under private ownership, they will nevertheless depend on public approval initially or on agreements concerning payment for use of the final ‘product’. The industry may be heavily regulated at both the national and local level, and it is usually necessary to obtain many different kinds of permits. The greater the discretion the relevant authorities enjoy, combined with the projects’ structural and financial complexity, the greater the opportunities they have to solicit bribes from the contractors.
The review of the Construction and Materials sector had not yet concluded at year-end. So far, one company within this sector has been selected for closer examination. In addition, the Council also embarked on the assessment of a state-controlled oil and gas company in 2023.
8.2 Other serious financial crime
So far, the Council has issued no recommendations to exclude companies or place them under observation pursuant to the criterion’s expansion to cover “other serious financial crime” as well. The criterion was added to the ethical guidelines in 2022 and an associated staff resource recruited in June that same year. In 2023, the Council continued working on several of the assessments of individual companies, all of which operate in the financial sector, that had already been commenced. At the close of the year, the assessment of three companies had come to an end, while five assessments remain active at the start of 2024. The Council engages in a dialogue with the companies under assessment at an early stage. In this connection, it was in contact with four companies in 2023.
The Council has otherwise obtained an overview of companies domiciled or with substantial business activities in countries which, based on authoritative sources, have a heightened risk of money laundering. The Financial Action Task Force’s (FATF), which maintains a so-called ‘grey list’ of countries that do not have adequate provisions to combat money laundering, is a key source in this respect – particularly when the grey-listing is due to national failings in the area of supervision and enforcement. This work had not finished at the close of the year, but has so far led to two companies being selected for further assessment.
Apart from this, the Council continuously monitors specific allegations concerning matters that fall naturally within the scope of this criterion. In line with the guidelines issued by the Ethics Commission, the Council is particularly interested in companies that are repeatedly involved in incidents of financial wrongdoing. Such incidents are logged on an ongoing basis and are used as the basis for assessing whether the company concerned should be contacted and assessed in further detail.