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Daily CSR

Daily CSR
Daily news about corporate social responsibility, ethics and sustainability

BnEI, ISO 37001: How the Banknote Industry is Tackling Corruption


The Banknote Ethics Initiative (BnEI) announced on September 20th, 2023 the appointment of Professor Deon Rossouw as the new chairman of this initiative created to “provide ethical business practice, with a focus on the prevention of corruption and on compliance with anti-trust law within the banknote industry.” This is an opportunity to take a look at the measures taken by a very confidential industry and its leading suppliers where the key word is trust.

Professor Rossouw is succeeding Antti Heinonen, who has been President of BnEI since its inception. He has extensive experience in the field of business ethics, having been CEO of the Ethics Institute of South Africa and Founding President of the Business Ethics Network Africa (BEN-Africa). Commenting on his new position, he says, “Ethics is a precondition for building stable and sustainable organisations and industries. I look forward to assisting the member organisations of the Banknote Ethics Initiative to strengthen the ethical culture in their organisations, and to be a collective force and voice for maintaining high ethical standards in this vital industry.
With 40 central banks across the world signed up in support of BnEI’s objectives and with 15 companies in the banknote industry having passed rigorous audits to obtain accreditation, BnEI is helping the industry establish its trustworthiness by holding members to the highest anti-bribery and anti-corruption standards.

The industry is indeed vital as it is responsible for printing the money we use every day and is composed of a small handful of highly specialized banknote printers and suppliers that make the printing machines, inks, paper, etc. needed. Banknote printing relies on the confidence of citizens in the currency they use and trust between economic agents, issuing bodies and national regulators.

While this trust is particularly based on anti-counterfeit efforts, including relentless R&D activities to give central banks a clear advantage over criminal enterprises, it is also built on the conduct of the players in this highly discreet sector given the immense need for confidentiality and security when dealing with money. As Henry Lawson writes for The Global Treasurer, “Until now, banknote printers (along with a few other industries) were mostly self-certified – which satisfied the customers, the central banks. However, this method has proven less-than-optimal over the years, and is starting to show its limits.”

To demonstrate a dedication to fighting corruption, many are now turning to external certification (such as BnEI and ISO 37001, the international anti-bribery standard) because the success of the companies that make up the industry depends on being able to earn and maintain the trust of their customers (central banks).
Testing That Trust

Unfortunately, while the banknote printing industry is typically secretive, scandals involving banknote printers, their suppliers and government officials, have made headlines over the years. Such scandals have tested the trust citizens have in their currencies and of central banks. Even though some of these circumstances were not so much due to malice from the industry's professionals, but more a result of the fact that, in some cultures, bribesare a normal part of doing business”. As such, banknote printers wanting to supply central banks in those countries may have felt that their only option was to grease a few palms to win contracts.

The Washington Post reported on a scandal that rocked Austria when nine people from Oesterreichische Banknoten-und Sicherheitsdruck (OeBS), a subsidiary of Austria’s central bank, were put on trial in 2014 for money laundering and bribery. The company was apparently struggling and in 2005, paid a total of $18 million in bribes to central bank officials in Azerbaijan and Syria in order to win printing contracts. Most defendants pleaded guilty with one executive telling the judge that OeBS would not have been awarded the contracts without the bribes. Seven out of the nine were convicted. The Post’s article goes on to say that the creation of the Banknote Ethics Initiative in 2013 is evidence that “the industry has moved to fight corruption,” although OeBS is not accredited.
In 2018, it was revealed that Securency (a supplier of the plastic base for banknotes) and Note Printing Australia (a banknote printer), two subsidiaries of the Reserve Bank of Australia (RBA), were fined over $21 million for bribery. The fines were sentenced in 2011 and 2012 for bribes offered to foreign officials between 1999 and 2004 in Indonesia, Malaysia, Nepal and Vietnam. The two subsidiaries admitted that their anti-bribery and anti-corruption systems and procedures in place were inadequate. Governor Philip Lowe said that, "The Reserve Bank strongly condemns corrupt and unethical behavior… The RBA accepts there were shortcomings in its oversight of these companies, and changes to controls and governance have been made to ensure that a situation like this cannot happen again." Securency (now CCL Secure) and NPA are now BnEI accredited members.

Transparency International Switzerland describes the case of KBA-NotaSys (now Koenig & Bauer Banknote Solutions, or KBBS), the Swiss-based subsidiary of German printing press manufacturer Koenig & Bauer, as the first company in Switzerland (and one of the only in its industry) to self-report corruption-related activities to the Office of the Attorney General in 2015. KBA-NotaSys was one of the first companies to become accredited by BnEI in 2014 and this process apparently helped the company discover that it had failed to prevent bribery for orders in Brazil, Nigeria, Morocco and Kazakhstan. Because the company self-reported the misconduct and strengthened its compliance systems (Koenig & Bauer is now ISO 37001 certified and KBBS is undergoing certification), the AG fined them one symbolic Swiss franc. They also paid about 27.8 million Euros in compensation – a large portion of which was used to set up an Integrity Fund for projects “promoting ethics, integrity and compliance in the banknote printing industry.
The Industry’s Anti-Corruption Tools
Since its creation in 2013, the BnEI has become a trusted source of external certification. Member companies that sign the initiative’s Code of Ethical Business Practice have one year to implement good practices from the BnEI audit framework and pass an audit conducted by either GoodCorporation or KPMG. Central banks can no longer rely on their suppliers’ self-certification and Leo Martin, director of GoodCorporation, notes, “This initiative should be a blueprint for how an industry can work together to raise ethical standards… It is gaining international recognition and its principles have already been endorsed by the Bank of England, the Bank of Canada , the Reserve Bank of Australia and several others.” On their side, many central banks worldwide have adopted binding ethics framework or policies. In addition to their internal use, these provisions are also intended to set an example for their partners. Bank of Mexico, which also supports BnEI, points out : “this Code will also serve as a reference for individuals with whom Banco de México has a relationship about the principles and values that govern the actions of Banco de México’s employees.”

Unlike the BnEI, ISO 37001 anti-bribery certification can be awarded to any public or private organisation, but given the history of bribery in the banknote industry, this internationally recognized standard is especially applicable to this sector. ISO 37001 sets out requirements for a company’s anti-bribery management system that enables them to “prevent, detect and address bribery.” The CRI Group argues, “…that adopting and complying with the ISO 37001 anti-bribery management system certification allows an organisation to conduct ethical business by implementing a viable anti-bribery management program… As an international standard of high repute, ISO 37001 has brought tremendous changes to market dealings and firm operations.” Certified companies instill trust because customers and partners are reassured that an external auditor has determined that the company has put effective measures in place to prevent and identify bribery.

Scandals involving banknote printing over the past few decades may have tested the trust needed for such a sensitive activity, but they have also pushed the industry to put a renewed focus on fighting corruption and bribery. As such, collective initiatives (BnEI) coupled with company-level efforts (pursuing ISO 37001 certification) suggest that the banknote printing industry is serious about cleaning up its act in the long term which may potentially set an example for other highly sensitive sectors.