How to tackle corruption in Singapore before it festers

INCORRUPTIBILITY has been a hallmark of Singapore ever since the late Lee Kuan Yew’s time.

It is not difficult to see why this is an attractive proposition. Zero tolerance for corruption creates a stable environment, which is attractive to investors. It leads to certainty, which is good for business. It minimises leakage, which helps to optimise returns on investment. It promotes innovation, which encourages risk-taking. It prioritises the rule of law, which espouses fairness.

So the July arrest of Transport Minister S Iswaran in connection with a graft-related probe by the Corrupt Practices Investigation Bureau (CPIB) sent shockwaves through the nation. The last time this happened was to Teh Cheang Wan in 1986, almost 40 years ago.

The specifics of the CPIB investigation have not been disclosed, but if Iswaran is implicated, it could severely tarnish the public’s perception of its elected representatives. It is also likely to undermine the oft-repeated justification for a government minister’s million-dollar salary. Greed is, after all and by its very definition, insatiable.

Looking at ethics over money

Criminologists and psychologists have, for some time now, argued that focusing on the financial aspect of corruption is the wrong way to combat the problem. It is equally, if not more, important to address the ethical issues at the heart of human behaviour – in particular the moral reprehensibility of engaging in corruption and the human consequences of one’s actions.

Gifting policies are a good illustration of this. The Singapore civil service, for instance, prohibits civil servants from retaining gifts worth S$50 or more unless they pay the market value of the gift. A similar policy exists in the ministerial code of conduct.

Policies like these help to:

• Establish clear thresholds regarding what is considered ethical behaviour; 
• Promote accountability and financial prudence; 
• Prevent any person from becoming beholden to any other person or organisation; and 
• Maintain independence and impartiality in a person’s dealings with another.

This is important for several reasons.

Corruption wears new skins

First, corruption is, by its very nature, insidious. It is constantly evolving and changing as technology becomes more advanced and as transactions become more sophisticated.

Where in the past, corruption tended to take the form of embezzlement or kickbacks to grease the wheels, in recent years such schemes have become far more elaborate – often involving opaque financial systems and professional enablers working out of tax havens. 

The 1MDB scandal in Malaysia involved the illegal funnelling of over US$4.5 billion through offshore bank accounts and a host of shell companies. Some of the funds were then used to fund luxury purchases, including a private jet and a super yacht, as well as the financing of a Hollywood film. Over US$700 million eventually found its way into the bank accounts of then-prime minister Najib Razak.

Cultural norms create risk of abuse

Second, cultural norms regarding the giving and receiving of gifts – particularly during festive celebrations – create a significant risk of abuse. In Singapore, it is not uncommon for gifts such as mooncakes, Christmas hampers and even red packets to be given to business associates and clients during the festive seasons.

While gifting is fairly innocuous if they are of a token value, this tends to become more problematic as the value of the gift increases. These gifts are often expensed in cash and could also compound the problem if there is a lack of proper accounting and documentation, as tends to be the case with such (relatively) minor expenses.

Enforcement and sanctions reach further

Third, and perhaps most crucially, organisations are becoming more wary of the threat of being sanctioned by regulators and enforcement agencies – many of which have become increasingly activist in prosecuting corruption in recent years.

Both the United States’ Foreign Corrupt Practices Act and the United Kingdom’s Bribery Act empower their respective national agencies to investigate and take enforcement action extraterritorially.

Earlier this year, Clear Channel Outdoor Holdings agreed to pay approximately US$26 million to the US Securities and Exchange Commission in disgorgement arising out of bribes paid by one of its agents in China.

Glencore – one of the world’s largest commodity traders – pleaded guilty to paying bribes to officials in three West African countries, and was ordered to pay the UK Serious Fraud Office a £281 million (S$474.7 million) fine.

In Singapore, the Prevention of Corruption Act empowers the CPIB to investigate both public and private sector corruption. It is seen to be less far-reaching than its foreign counterparts, but defines corruption broadly to include the giving or soliciting of any gratification that is done with corrupt intent. It also applies to any corrupt act committed by a Singaporean outside Singapore.

In August this year, the CPIB charged a former Sembcorp Marine executive for corruptly obtaining over S$200,000 in bribes from Sembmarine’s contractors in order to advance those contractors’ interests with the company. In January, the CPIB issued stern warnings to six former Keppel Offshore & Marine senior employees in relation to a US Department of Justice investigation concerning some US$55 million in bribes paid to Petrobras in Brazil.

What can organisations do?

Given the magnitude of the problem of corruption globally, coupled with inherent human fallibility, what should organisations be doing to guard against this scourge? A code of ethics and conduct is a great place to start, as it gives one a reference point for where the out of bounds markers are. Organisations should also consider implementing a broader compliance programme. 

From experience, an effective compliance programme typically includes the following features: 

• A whistleblowing channel so that grievances and issues can be raised discreetly and confidentially; 
• Commitments to the protection of whistleblowers from retaliation, since whistleblowers tend to be close to the action and are often easily identifiable; 
• A fact-finding process to investigate allegations thoroughly and impartially; and 
• A disciplinary process in order to mete out the appropriate sanctions against wrongdoers. 

Establishing an appropriate tone from the top is also important as it conveys a strong message that the organisation’s leaders and senior management are taking such issues seriously. 

Control functions such as internal audit and compliance also have an important role to play in identifying and weeding out potentially problematic business arrangements. These tend to take the form of contracts with no discernible commercial value, the use of third party intermediaries or “introducers”, as well as related party transactions. 

A robust compliance programme is therefore akin to a good prophylaxis. It shields people from the temptation of bribes and other facilitation payments, and keeps them on the straight and narrow. This is needed more than ever in Singapore. According to Transparency International’s Corruption Perceptions Index 2022, Singapore has dropped to fifth place globally with a score of 83/100 (from fourth in 2021, with a score of 85/100). 

As a country that obsesses over results, this deterioration cannot have gone unnoticed. The authorities will similarly want to be seen to take firm action to arrest this slide in order to restore investor confidence and Singapore’s position at the pinnacle of incorruptibility. As the late Lee himself thundered during an election rally in 1980: “Whoever governs Singapore must have that iron in him, or else give it up!”

The writer is a partner and the head of the Singapore employment practice at international law firm Simmons & Simmons. This commentary reflects his personal views and is not intended to constitute legal advice.