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Survey reveals bribery and corruption risk still high

15 May 2015  |  5974 views  |  0

No industry is immune to bribery and corruption but a large number of companies are still all but ignoring this growing problem. The 2015 Deloitte Bribery and Corruption Survey of Australia and New Zealand has found 23% of respondent companies have experienced at least one instance of domestic corruption in the last five years yet 77% of organisations have never conducted a risk assessment.

 

Deloitte looked at a range of themes around exposure, enforcement and accountability. Its findings reveal that organisations in Australia and New Zealand, in common with other high-risk countries such as the US, UK and China, were encountering bribery and corruption incidents and challenges which many are ill-equipped to deal with. Deloitte points out that the potential damage not only to reputation but also to the bottom line is thought to be understood but not generally well managed.

 

While large percentages of respondents reported significant instances of known domestic and foreign corruption within their organisation, worryingly 40% said they did not know whether a system was in place for mitigating risk or how they could report a suspicious incident through an official channel made available by their employer.

 

The latest laws encourage whistleblowers, asking organisations to provide a way for employees to report suspicious incidents, such as a hotline, and offering protection to staff members who provide relevant information.

 

David Green, director of the UK Serious Fraud Office, welcomed the report. “At the tactical level, we must map and count the problem, identify sectors most at risk, share intelligence, encourage whistle-blowing and maximise enforcement,” he said. Deloitte Australia CEO Cindy Hook added: “A strong culture, vigilance and critical thinking go a long way, and are well worth the investment.”

 

Crossing borders

It is not just managing the risk of bribery and corruption incidents, however, there is also the matter of compliance with relevant legislation everywhere organisations operate. Even countries without detailed anticorruption laws could well be following the principles of foreign law. Indeed, the UK Bribery Act 2010 and the US Dodd-Frank Wall Street Reform and Protection Act, for example, have filtered across borders, with their guidance growing in international significance. Dodd-Frank also applies universally to organisations beyond US corporations to their foreign subsidiaries and to overseas operators listed in the US or with subsidiaries subject to US securities regulations. US companies or subsidiary organisations are also bound by the US Foreign Corrupt Practises Act, often mistakenly presumed not to cover commercial bribery. In addition, an organised crime and anti-corruption bill is making its way through the New Zealand parliament and, in its current form, will widely reflect foreign law with considerable alignment with the UK Bribery Act.

 

The increasing internationalisation of these measures will bring more peace of mind but, at the same time, greater compliance needs. Deloitte’s global managing director for forensic and data analytics, Tim Phillipps, also notes: “We are seeing an increase in coordination between law enforcement agencies in different Asian jurisdictions in the fight against cross-border corruption The Corrupt Practices Investigation Bureau and prosecutors in Singapore have a good working relationship with their counterparts in Malaysia, Hong Kong and Indonesia, and are constantly networking and building new links with other jurisdictions. Anti-corruption legislation is becoming increasingly extra-territorial in nature.”

 

The Deloitte survey revealed that of the 40% of respondents operating in high-risk jurisdictions, 35% are known to have experienced a bribery and corruption event in the last five years, up from the 21% reported in 2012. The industries most likely to report offshore incidents in 2015 are the financial services sector; critical national infrastructure providers, such as energy suppliers; manufacturers and engineering companies; and professional services companies. It has been widely recommended and reported that bribery and corruption management needs to be discussed at board level, however 19% of those working in high-risk locations said it was not.

 

The public sector is just as accountable. Deloitte points out that “government agencies are the custodians of information and processes that can be lucrative for people prepared to cut corners”. The company warns: “Where this involves bribery, the compromised integrity of a public official undermines the rule of law and democracy, and paves the way for organised crime and even terrorism.”

 

Common occurrence

52% of events occurred in the last 12 months. The five most commonly reported types of incident, accounting for 69%, were undisclosed conflicts of interest (16%); supplier kickbacks (15%); personal favours (14%); inappropriate gifts/hospitality (13%); and releasing confidential organisational information to a third party (11%).

 

The survey asked what the top five factors were that could help prevent bribery and corruption incidents. The results confirmed that these are:

  • Organisational culture
  • ‘Tone from the top’
  • Codes of conduct
  • Process controls
  • Policies and procedures

 

The results confirm the need to feed organisational culture from the top down and ensure bribery and corruption law is on the board table. However, they also point out how much employee engagement with any programme relies on the right tools. When process controls, publicised policies and known procedures are in place, legal compliance and the ability to spot malpractice are much easier.

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