Illegal business practices including bribery are still used by many organizations to secure or retain business, despite the rise in international anti-corruption legislation and law enforcement, according to the findings of Ernst & Young’s 10th global fraud survey, Corruption or compliance: weighing the costs.
The survey, which interviewed 1186 business leaders in large organizations across 33 countries, showed that almost a quarter of respondents (23%) admitted their organization had been approached to pay a bribe in order to retain or win business in the last two years. Fully 15% of US respondents said they had lost business to a competitor who had paid a bribe.
US companies still not doing enough to understand risks – especially overseas
US companies’ experiences of illegal business practices are lower than the global average. However, bribery and corruption still play a role in the conduct of business, particularly in overseas markets.
15% of all US respondents said that their organization had experienced at least one incident of bribery or corruption in the last two years, compared to 6% in Germany and 6% in France. The global average was 24% – highlighting the increased risks of doing business outside the US and Western Europe.
13% of US respondents admitted that their organization had been asked to pay a bribe to retain or win business in the last two years, compared with 16% in Germany, 11% in the UK and 10% in France.
Dale Kitchens, who leads the fraud and investigations team in Ernst & Young’s Fraud Investigation & Dispute Services practice in the Americas, says that business leaders and board members face daunting challenges around their compliance obligations in the current environment of heightened enforcement. “Best practices in anti-bribery compliance require companies to take a much more comprehensive view of the way bribery and corruption affect their business.”
Kitchens also notes that although companies recognize the risks of corruption and are doing more to combat it – more than half of respondents are increasing training on the subject – knowledge of relevant anti-corruption legislation remains scant, undermining compliance efforts.
High-profile investigations into corrupt practices have dominated the headlines in the past two years, as the US Department of Justice has taken a more aggressive and extra-territorial approach to enforcing the US Foreign Corrupt Practices Act (FCPA). Yet a staggering 84% of all respondents globally claimed to know little to nothing about the FCPA, compared with 52% in the US.
“It is clear from the survey results that global companies subject to anti-bribery legislation and FCPA do not fully understand the details of their requirements,” Kitchens comments.
Steven Kuzma, Americas leader of the Fraud Investigation & Dispute Services practices for Ernst & Young, says that companies cannot afford to ignore the obligations associated with the FCPA and other anti-bribery laws.
“Non-compliance can lead to significant penalties and fines for US companies, as well as expensive litigation, court-appointed monitors, and in some cases even imprisonment for violators. Unless companies and their executives fully understand anti-bribery legislation and the requirements of FCPA, they run unnecessary risks,” says Kuzma.
Ethical behavior not just about staying on the right side of the law
Kitchens concludes, “Despite the best efforts of some governments, non-governmental organizations and law enforcement agencies, the risk of bribery and corruption remains prevalent. Awareness, education and control are the most effective methods for dealing with corrupt financial practices. Promoting ethical behavior in your organization – making a difference – is not just about staying on the right side of the law. It’s good business.”
About the survey
To create Corruption or compliance – weighing the costs: The 10th global fraud survey, researchers conducted 1186 telephone interviews with senior executives in large organizations, based in 33 countries. Interviews were conducted between November 2007 and February 2008. Interviewees were senior financial and risk managers, as well as heads of legal, compliance and internal audit teams.
About Ernst & Young’s Fraud Investigation & Dispute Services
Dealing with complex issues of fraud, regulatory compliance and business disputes can detract from efforts to achieve your company’s potential. Better management of fraud risk and compliance exposure is a critical business priority – no matter the industry sector. With our more than 1,000 fraud investigation and dispute professionals around the world, we assemble the right multidisciplinary and culturally aligned team to work with you and your legal advisors. And we work to give you the benefit of our broad sector experience, our deep subject matter knowledge and the latest insights from our work worldwide.
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 130,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve potential. For more information, please visit www.ey.com.
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