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Anti-corruption statement by professional bodies

The Association of Chartered Certified Accountants (ACCA), The Institute of Chartered Accountants in England and Wales (ICAEW), the International Federation of Accountants (IFAC) and other professional bodies recently signed a joint statement deploring corruption alongside professional accountancy organisations and the legal fraternity in the United Kingdom.

The joint statement highlights the vital role professional accountants and lawyers play in fighting corruption and their deep commitment to combatting it by continuing to work with governments, regulators, law enforcement agencies, and other international organisations and states as follows:

“Bribery and corruption represent serious threats to economic growth, individual livelihoods and civil society across the world.

“For many years, professional bodies have worked alongside government, regulators, law enforcement and international bodies, and supported our members to combat bribery, corruption, tax-evasion, money laundering and the financing of international terrorism. We will continue this work and provide support to facilitate national and international co-operation and to improve monitoring and enforcement systems.

“We deplore corruption and the significant harm it causes; we play a vital role in training, educating and supporting our professions to uphold the highest levels of integrity and ethical standards.

“We know criminals seek to abuse the services provided by our members to launder the proceeds of corruption and we are committed to ensuring the professions we serve are armed with the tools to thwart this abuse.

“We stand united in the fight against corruption in all its forms and are committed to sharing knowledge, skills and intelligence with our fellow professionals and with all agencies fighting this cause.”

European Central Bank (ECB) report finds that governance and risk appetite frameworks of euro area banks need to be strengthened

A report prepared by the ECB assesses industry practices in the areas of internal governance and risk appetite frameworks, highlighting both shortcomings and good practices. It outlines supervisory expectations and concludes that many euro area banks need to improve in both areas to achieve international best practices:

  • most banks need to improve the quality of debate on the board and its capacity to independently challenge the management;
  • many banks need to boost their board’s collective knowledge, strengthen its independence and have a clearer allocation of responsibilities;
  • most banks still need to implement more robust and comprehensive risk appetite frameworks, which should be consistent with their overall risk profile.The report summarises the findings of a thematic review in which the ECB evaluated the governance and risk appetite frameworks of the banks it directly supervises. It identifies good practices and concludes that many euro area banks still need to improve to reach best international practices.

In addition to its day-to-day supervisory work, ECB Banking Supervision prepares industry-wide reports, also known as thematic reviews, on particular supervisory topics. The effectiveness of banks’ governance and risk appetite frameworks was identified as a priority for such a review.

The review, which applies a harmonised approach, led to concrete supervisory follow-up actions, defined areas for subsequent on-site inspections, and identified issues to be included in the Supervisory Review and Evaluation Process (SREP).

The report also calls on banks to develop and establish a comprehensive risk appetite framework to help strengthen risk awareness and support a sustainable business model. Such a framework should define the level of risk tolerance a bank is willing to take in relation to both financial and non-financial risks. Banks’ managements should deploy risk metrics and limits more consistently, closely monitor them and report back to the board regularly. The risk appetite framework also needs to be aligned more closely with the business plan, strategy development, capital and liquidity planning, and remuneration schemes of banks.

European Commission proposes public tax transparency rules for multinationals

This proposal has been submitted to the European Parliament and the Council of the EU, and builds on the Commission’s work to tackle corporate tax avoidance in Europe, estimated to cost EU countries EUR 50-70 billion a year in lost tax revenues. It requires multinationals operating in the EU with global revenues exceeding EUR 750 million a year to publish key information on where they make their profits and where they pay their tax in the EU on a country-by-country basis. The same rules would apply to non-European multinationals doing business in Europe. In addition, companies would have to publish an aggregate figure for total taxes paid outside the EU.

It amends the Accounting Directive (Directive 2013/34/EU) to ensure that large groups publish annually a report disclosing the profit and the tax accrued and paid in each member state on a country-by-country basis. This information will remain available for five years. Contextual information (turnover, number of employees and nature of activities) will enable an informed analysis and will have to be disclosed for every EU country in which a company is active, as well as for those tax jurisdictions that do not abide by tax good governance standards (so-called tax havens). Aggregate figures will also have to be provided for operations in other tax jurisdictions in the rest of the world. The proposal has been carefully calibrated to ensure that no confidential business information would be published.

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