The accountancy firm PwC has been told by the UK Government that it should ensure global compliance with the OECD Guidelines for Multinational Enterprises which cover ethical business standards.

This follows a complaint by UK Lawyers for Israel (UKLFI) about PwC to the UK’s OECD National Contact Point, which is part of the Department for International Trade. The OECD Guidelines are international human rights standards for businesses which aim to ensure a high level of protection wherever multinational companies or groups operate.

The Palestinian Authority (PA) receives hundreds of millions of pounds every year from international donors. A significant amount of this money is spent by the PA on paying salaries to convicted terrorists in Israeli prisons as well as to their families. These payments reward and encourage further acts of terrorism, and are sometimes referred to as “pay-for-slay”.

UKLFI called for an investigation into potential breaches by PwC of the OECD Guidelines, when one of its network firms audited donations by the World Bank to fund for the support of the Palestinian Recovery & Development Plan from 2009 until 2015.[1] Some of the money from this trust fund was used for terrorist salaries.[2]

The Government accepted UKLFI’s concern that a financial audit could be overly relied upon by donor nations to ensure funds donated for use by the PA were not encouraging “adverse human rights impacts”.

PwC attempted to avoid scrutiny of its actions by arguing that the OECD Guidelines do not apply  because it is a network of separate firms. The Government rejected PwC’s arguments and confirmed that the PwC network of firms is a multinational enterprise. This finding creates a significant issue for PwC internationally, since all of its work around the world must now comply with OECD Guidelines and could be the subject of complaints by other interested parties.

The Government found that PwC had not breached the Guidelines by carrying out the audit. However, the Government was unable to fully investigate many of the matters within UKLFI’s complaint because PwC relied on client confidentiality when it refused to disclose relevant material to the Government.

PwC refused to tell the Government whether it had raised any concerns about terrorist financing with its client, or whether it had carried out due diligence to mitigate actual or potential adverse impacts of its audits.

In the circumstances, the Government concluded there was no breach of the OECD Guidelines by PwC. However, the Government’s call for PwC to update its global human rights policies to reflect the OECD Guidelines is a significant victory for UKLFI’s goal of ensuring that terrorist payments are properly scrutinised.

“We are pleased that PwC will be now be bound by the OECD guidelines for business conduct as this was one of the aims of our complaint.  We hope that this will help to prevent further human rights abuses by those who pay or facilitate the payment of terrorist salaries” commented Jonathan Turner, chief executive of UKLFI.

The Government has requested updates from both parties in a year’s time. UKLFI will use this opportunity to hold to account PwC and any other auditors of funds donated to the PA.

The Final Report of the UK National Contact Point is available HERE

[1] The PRDP is a plan to deliver high level national policy goals and supporting objectives. These goals and objectives are set out in the PNPA, the guiding policy framework for the PRDP, to provide: a forward-looking agenda for Palestinian development and for reforming Palestinian institutions; a clear rationale for the activities of ministries, agencies and other public bodies; a basis for establishing priorities in the allocation of financial resources; and, performance targets at the national and ministry/agency level. See http://siteresources.worldbank.org/INTWESTBANKGAZA/Resources/PRDP08-10.pdf

[2] The UK NCP noted that the PRDP included a specifically budgeted expense of $61 million for the Ministry of Detainees and Ex-Detainees to “Provide support & protection for prisoners, freed prisoners & their families”.