Regulating and holding economic service providers (ESPs) accountable
Within the finance sector, economic service providers or financial intermediaries deserve special mention. When talking about corporate capture of the State, the role of ESPs comes up time and again. They are often described as “shadowy middlemen,” the actors that “grease the wheels” of corporate capture, and even as the “architects” of capture.
Though it would appear that the term “economic service provider” is more commonly used in discussions of capture in Africa and Asia, it is safe to say that one version or another of the phenomenon — how accountants, auditors, consultants, lawyers, and other economic and financial service providers act as conduits for the subject-object, supply-demand duality — is used worldwide.
In South Africa, ESPs were oft-cited during the Zondo Commission proceedings for their now well-documented role in carrying the water for the Gupta family vis-a-vis the Administration of President Jacob Zuma (2009-18). What follows are recommendations for their reform:
- Services provided by ESPs should be based on ethics,through proper training of professionals and internal control systems of professional service companies.
- Professional associations,given their interest in maintaining the prestige of the profession, can play an important role in supervising professional best practices.
- Imposing sanctionscan also be a mechanism to prevent State capture, ranging from fines to restitution (money return), expulsion of professional associations (through the withdrawal of certifications or credentials), and the imposition of criminal sanctions. These sanctions should apply to both companies and individuals.
- Since much of the corruption arises from relationships between private companies and politically connected officials involving intermediaries,practices such as the rotation of legal and auditing firms could prevent the formation of co-dependency relationships between companies and clients.
- A public administrationis needed that prevents appointments based on patronage/clientelism, isolates officials from political interference, and maintains high professional standards to prevent State capture.
- Greater transparency regarding beneficial owners(public registers) and creating environments that encourage whistleblowers are needed.
The manifestations and impacts of ESPs seem endless — accountants, auditors, consultants, lawyers, and other “experts” facilitate the flow of money through global markets, causing disparities on an enormous scale. Herein lies the opportunity: we can track ESPs and monitor how they facilitate capture — for example, if they always give good marks as auditors, or if they are consistently hired to facilitate transactions between suspect actors — and hold them legally accountable, for example using anti-money laundering and other criminal laws. By following the money, we can identify vulnerabilities across the subject-object supply-demand duality and apply pressure.