Enhancing Corporate Accountability Through Covert Situational Integrity Testing (CSIT)

This article explores the potential of ‘covert situational integrity testing’ as a mechanism for assessing corporate and organisational compliance with legal rules and standards, the goal being to enhance corporate accountability. There are major challenges to holding corporations/organisations to account for non-compliance: low detection levels, incomplete understanding of the inner workings of organisations, and the modest power of current social scientific research methodologies. This article argues that there is scope for methodological innovation through the use of covert situational integrity testing, a variation of mystery shopping methodologies, to address some of these gaps, with a focus not on service quality or customer satisfaction but on compliance with regulatory and legal requirements, and as a data gathering tool on secretive and difficult to access areas of business operation. We focus on two examples: AML compliance by challenger banks, and the promotion of aggressive tax avoidance schemes. Our core argument is that covert situational integrity testing provides a research mechanism through which robust and systematic observational data can be collected and scrutinised by independent, third-party assessors to understand levels of organisational/corporate compliance with legal rules and standards, and by doing so, identify critical vulnerabilities and strengths in the compliance responses of organisations and industries.