Compliance Management in Public Sector

The public sector as understood through a general definition of Public Administration: i.e., understood as the set of public entities that carry out administrative activities as functional public bodies with national (e.g., the State) or territorial (e.g., Counties, Regions, Provinces - depending on the type of central power, whether Republic, Monarchy or Federal State) operations, are institutionally intended to take care of the general interests of the community".



Therefore, it is understood as that organization or more, composed of one or more central and peripheral powers, to provide services and goods entirely directed towards citizens and their needs.


One of the critical functions of public state bodies (including governmental ones) is to contract economically with private parties without ceasing to be a public figure. This is done by means of special contracting procedures to meet internal and external needs and requirements of the state and its citizens.


So much so that each state, following international regulatory parameters, draws up guidelines for dealing with companies and firms. Therefore, the state operates as a private individual, choosing how or which contract it stipulates (whether in-house, through tenders or concessions, etc.), for example, about the transparency of the procedures for awarding a tender for the construction of a public work or infrastructure. The problem arises when in these tenders or contracts, the state presents itself as private. As guarantor of respect for the underlying agreements (the company will undertake to carry out the work, and the state will pay you at the established time) there can be criminal infiltration. This generates a willingness on the part of many criminal organizations to break into these contracts, an action defined as 'criminal infiltration,' to divert funds away from the purposes for which the public work was established. Anti-money laundering legislation, as far as mitigation of financial risks is concerned, provides for mitigating and preventing risks related to the public sector by ensuring Compliance and sound management.


One of the leading financial risks, particularly perceived and felt in underdeveloped countries, is corruption. In the preliminary discipline of any public tender, e.g., a call for tenders, the competent authorities (courts or bodies, agencies in charge of supervising public expenditure) carry out checks on the suitability of companies and candidates (representatives), requesting several documents, e.g., personal, tax and criminal records. But sometimes, such procedures are not sufficient to maintain the integrity of a procurement process. The discipline of Compliance has evolved considerably in recent years in the private sector. However, compliance experts are noticing critical operational gaps concerning monitoring in the public sector (public administration). This has caused a number of perplexities in the auditor and compliance world, wondering what operational resources could be deployed in the public sector to ensure proper management and efficiency of the public and state administration system.


We have witnessed in particular in recent years the integration of cyber threats as new risks, to which compliance, by means also of the contribution and knowledge of AML systems, can validly support public State bodies, e.g., subjective checks of the suitability of candidates, Know Your Customers (KYC) and digital onboarding and out-boarding services. One also thinks of the identification or information exchange of data (also of a fiscal nature) to verify the ownership of directors and shareholders of foreign companies, the detection of hypothetical carrier companies. Thus avoiding fraud or deception that could result in the loss of thousands of millions of dollars a year and cause inefficiencies and inefficient public services.


To give a better idea of how vital a compliance system can be in public administration, one thinks of the period of the pandemic due to Covid-19, of the many companies that were set up to provide goods and services intended and directed to cope with the pandemic: e.g., sanitizing gels, gloves, artificial respirators, etc. for the production and distribution of surgical masks, sanitizing gels, gloves, artificial respirators, etc. In particular, in this specific case of emergency, the States were not able to start the standard selection procedures, e.g., tenders, as they require many months to be awarded. Still, they had to contract immediately or request the minimum of documentation to be able to use the goods and services mentioned above. Moreover, many criminal organizations (European and non-European), seeing the need on the part of many states, have taken the opportunity to carry out fraud, deception, and deceit. Finally, it is the responsibility of every state and government, whether large or small, poor or rich, to ensure peoples' healthy development.



Written by Dimitri Barberini 


Previous Post
How Regulations Could Empower The Crypto Industry?
Next Post
Anti-Money Laundering Changed Over Time