Bribery rife despite anti-corruption efforts

2008

Anti-corruption efforts may have become increasingly strong across the world in recent years, but almost a quarter of senior executives admit that their organisation had been approached to pay a bribe in order to retain or win business in the last two years.

Illegal business practices remain a widespread problem despite the rise in international anti-corruption legislation and law enforcement. And in many cases, the problem is getting worse, not better.

That's the message from the tenth global fraud survey from Ernst & Young, which interviewed 1186 business leaders in large organisations across 33 countries.

According to its findings, almost a quarter of respondents (23 per cent) admitted their organisation had faced pressure to make illegal payments while almost one in five (18 per cent) said they had lost business to a competitor as a result of them paying a bribe.

Anti-corruption enforcement has become stronger around the globe over the past five years, according to nearly 70 per cent of respondents to a new survey of business leaders worldwide.

But despite this, a third of those questioned said that they felt corrupt business practices were becoming worse, despite the fact that companies are recognizing the risks of corruption and are doing more to combat it.

While 37 countries have implemented the OECD Anti-Bribery Convention, the report found that knowledge of relevant anti-corruption legislation remains patchy.

For example, the Foreign Corrupt Practices Act (FCPA) has become the de facto international standard regarding bribery and corruption, yet only a third of respondents claimed to have a good knowledge of it. Moreover, almost six out of 10 in house lawyers admitted they were not familiar with the FCPA.

But as The report points out, given US authorities' more aggressive and extra-territorial enforcement of the all companies need to enhance their understanding of it.

"Companies cannot afford to ignore the obligations associated with the FCPA and other anti-bribery laws. Compliance is certainly not just a matter for SEC registrants or US nationals," explains David Stulb, Global Leader of Fraud Investigation & Dispute Services for Ernst & Young.

"Companies and their boards that do not consider their corporate and individual vulnerability to FCPA enforcement are taking unnecessary risks."

On a more positive note, the survey shows that companies are increasingly waking up to the risks that corruption presents. More than half of respondents are increasing training on the subject and 45 per cent conduct some form of anti-corruption due diligence before making corporate acquisitions.

"Many enforcement actions arise in the context of mergers and acquisitions. Companies need to consider more robust due diligence measures, particularly when target companies are active in higher-risk countries," says Stulb.

"Companies should consider the potential regulatory liabilities they are acquiring relative to bribery and corruption. It's not just about avoiding penalties – it's about improving the business."

John Smart, UK head of fraud investigation and dispute services at Ernst & Young, added that in the current environment business leaders and board members face daunting challenges around their compliance obligations.

"Recommendations of best practice in anti bribery compliance will require companies to take a much more comprehensive view of the way bribery and corruption affects their business."

What's more, he said, organizations need to remember that ethical behaviour not just about staying on the right side of the law

"Awareness, education and control are the most effective methods for dealing with corrupt financial practices. Promoting ethical behaviour in your organisation – making a difference – is not just about staying on the right side of the law. It's good business."