In recent years, the world has witnessed a surge in financial crimes, often referred to as “white collar crime conspiracies.” These crimes, which range from one country to another and across continents, have devastating consequences for their victims, society, and governments. Their impact is profound, as they contribute to economic instability and erode public trust. Some of these crimes transcend geographical boundaries, making them a pressing global concern. The negative effects on governments, businesses, and individuals are not only alarming but also deeply destructive.
Financial crime X-rayed
Financial crime, or “white-collar crime conspiracies,” encompasses a wide range of illegal activities that are motivated by financial gain. These crimes are committed through deceit, manipulation, and fraud. Examples of financial crimes include money laundering, fraud, bribery, corruption, terrorist financing, embezzlement, securities fraud, Ponzi schemes, tax evasion, insider trading, scams, insurance fraud, mortgage fraud, forgery, theft, and cybercrime, among others.
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In response to these crimes, various measures have been developed to combat financial crime globally. These measures include whistleblowing policies, forensic investigations, and most notably, the implementation of the NOCLAR principle.
NOCLAR: A powerful tool against financial crimes
NOCLAR stands for “Non-Compliance with Laws and Regulations.” This principle serves as a guide for professional accountants, instructing them on the actions to take in the public interest when they become aware of illegal activities or non-compliance by a client or employer. NOCLAR was established by the International Ethics Standards Board for Accountants (IESBA) and came into effect on July 15, 2017. The IESBA develops high-quality ethical standards for professional accountants worldwide.
The NOCLAR principle plays a critical role in bolstering the credibility of the accounting profession by prioritising public interest. It directly addresses violations of laws and regulations that pertain to issues such as money laundering, fraud, bribery, corruption, tax evasion, environmental protection, public health, and safety. By doing so, NOCLAR ensures that accountants actively work to prevent and expose financial crimes, even in the face of confidentiality constraints.
“By promoting transparency and accountability, the NOCLAR principle encourages organisations to adhere to laws and regulations, ultimately protecting their investments from losses due to non-compliance.”
Benefits of the NOCLAR principle
The adoption of the NOCLAR principle offers several significant benefits. First, it raises the ethical standards for the global accounting profession by requiring accountants to prioritise public interest over personal or corporate interests. This ensures that the profession maintains a high level of integrity and accountability.
Furthermore, the NOCLAR principle positions accountants at the forefront of the global fight against financial crimes. It empowers them to take a proactive role in combating money laundering, bribery, corruption, insider trading, tax evasion, and other illegal activities. By promoting transparency and accountability, the NOCLAR principle encourages organisations to adhere to laws and regulations, ultimately protecting their investments from losses due to non-compliance.
The principle also strengthens the role of auditors and other professional accountants, enabling them to disclose potential non-compliance situations. This disclosure, which would otherwise remain confidential, helps protect public interest and ensures that organisations remain compliant with the law.
Perhaps most importantly, the NOCLAR principle fosters a culture of compliance within the profession, encouraging senior accountants to report any deviations from established norms or standards. By doing so, it helps create an environment of ethical behaviour and accountability, which is critical in the fight against financial crimes.
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Conclusion
The NOCLAR principle fills a critical gap in jurisdictions where legislation may not adequately address the responsibilities of professional accountants. It provides essential guidance that complements existing regulations and helps combat financial crimes more effectively. By ensuring that professional accountants disclose critical information in the public interest, NOCLAR helps to check the excesses of those who might otherwise conceal illegal activities under the guise of confidentiality.
In conclusion, the NOCLAR principle is more than just a set of guidelines; it’s a powerful weapon in the ongoing battle against financial wrongdoing. By elevating the ethical bar of the accounting profession, NOCLAR ensures that accountants are not merely number crunchers but vigilant guardians of public trust. It empowers them to stand up against corruption, fraud, and other financial crimes, safeguarding our societies from their devastating consequences. As the global landscape continues to evolve, the importance of NOCLAR will only grow. It is a cornerstone of a more transparent, accountable, and just world.
Kingsley Ndubueze Ayozie: FCTI, FCA a Public Affairs Analyst and a Chartered Accountant by profession writes from Lagos.
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