Member Article

CSR and compliance: banknote manufacturers are now under high scrutiny by Central Banks

Failing to make sure the people and organizations you work with are trustworthy can come back to bite you. This is as true with your employees as it is with your contractors. Guaranteeing your liability is covered through compliance is the only thing that keeps you out of trouble when things go awry. Central banks are starting to see this as much as anyone, particularly in how it relates to awarding tenders for banknotes manufacture, a highly sensitive and secure industry that is coming under increasing scrutiny. For this article we contacted a number of central banks to see what their practices were in regard to procurement of bank notes, particularly regarding how they interact with the companies responsible for printing.

With episodes like the Tunisian central bank’s fiasco with the contractor Crane Currency, it has been highlighted that there are risks of operating alongside partners with thin corporate social responsibility (CSR) policies. The Tunisians have had to work on wrestling back control of the printing process, which was being conducted unsatisfactorily in a foreign country, against the bank’s wishes. More recently, the same currency manufacturer has been embroiled in a scandal related to accepting kickbacks from the Central Bank of Liberia. The actions leading up to the scandal were described by Liberian officials as “gross irregularities and breaches of law”. Crane Currency reportedly printed additional non-contracted Liberian currency and then took steps to hide the paper trail. Corruption in the realms of business responsible for the production of currency are high-risk and very dangerous. Given the financial scale of such transactions, bribery is a real possibility. And for the economy of the nation involved, the irresponsible handling of printing and distribution can wreak havoc.

When we contacted the Tunisian central bank to ask about the steps it had taken towards improving its own CSR practices and safeguarding the public by ensuring its manufacturers’ policies were equally responsible, they simply replied to us: “Due to security reasons, we regret to inform you that the Central Bank of Tunisia does not communicate about its procurement policy for banknotes.”

Despite the reservations of the Tunisians, we were able to get some responses from other national banks around the Globe: In Europe, the Swedish Central Bank, Riksbank was able to outline measures that it takes to account for most issues relating to procurement of currency and quality of banknote production. On the subject of CSR and compliance, they had this to say:“In the agreement there are requirements regarding environmental and CSR issues. It is important for the Riksbank that all our suppliers work according to international standards regarding environmental and CSR issues. These issues are regularly followed-up by the Riksbank in the agreement management work done together with the supplier.” They also made clear that the Riksbank regularly audits the supplier to verify that the supplier works according to the contracted agreement. The Riksbank apparently also carries out specific audits for security and quality, and regularly has meetings with the supplier to follow-up on the agreement in general.

So it goes for Sweden. But, in the delicate matter of currency, emerging nations need dependable contractors. Because they themselves have less ability to exert control over manufacturers who choose not to play by the rules, these countries cannot take on the risks of working alongside entities with subpar policy transparency. With less resources, the technologies and know-how required for the production of difficult-to-forge notes can be costly for smaller nations. This is why universal standards of operation would particularly benefit small countries in the selection of contractors, as achieved for instance in Croatia: Indeed, the Croatian National Bank (CNB) ensures the compliance of their supplier on safety and environmental issues, in particular through internationally recognized ISO standards. The control covers the entire supply chain and as explained to us by the CNB’s public relations manager: “The contract with banknotes producers includes packaging, transport and security standards as well as handover and oversight procedures. Experience gained in printing work handover of the banknotes to the storage in our vaults provides basis for revision of the process.”

In Asia, with the central bank of the Philippines (BangkoSentral ng Pilipinas - BSP) launching new tenders for currency, the world is watching and waiting to see if global trends towards prudent contractor vetting will touch a nation which has been rocked by graft issues in the past.

The president recently appointed a new governor for the central bank, a man by the name of Benjamin Diokno, a banking outsider and a presumed political asset for the president. As BSP governor he will also, crucially, chair the Anti-Money Laundering Council, despite criticisms of his own conduct. Given the frosty reception his appointment has already received from investors, now would be a good time for him and the BSP to demonstrate wisdom. The new governor has faced previous scrutiny over his handling of the 2019 budget, as well as accusations that he demonstrated nepotism in assigning government contracts in his time as budget secretary. A move towards conspicuous, improved compliance standards would probably be a good idea.

Saudi Arabia is another example in the Middle East of a country that could greatly benefit from universalization of standards, in particular those pertinent to the prevention of bribery. In the Kingdom notorious for systemic corruption, the introduction of ISO standards on ethical conduct and mechanisms for the prevention of bribery, ISO 37001, would be a valuable step in the right direction. It would also begin the process of cleaning up the nation’s marred international reputation through the introduction of compliance criteria recognized by all. A sensitive industry such as the printing of security documents and banknotes is primarily concerned by these new requirements for transparency and anti-corruption measures. In fact, Saudi Arabia has just granted a contract for tax stamps, as recently announced by Proactive Investors Limited: “Banknote printer De La Rue’s tax stamp division has made particular progress with contracts secured for services in six European countries as well as in Saudi Arabia […] “ There is no doubt that this contract but also the following tenders for the printing of banknotes will therefore be under international high scrutiny.

This was posted in Bdaily's Members' News section by Lance Austin, journalist and documentary director .