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Clients 'unprepared' for anti-bribery compliance

One in two companies failing to meet due diligence requirements  

26 September 2013

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By Manju Manglani, Editor (@ManjuManglani)

International companies have “disturbing gaps” in anti-corruption compliance, according to recent research.

It found that only half of the 300+ international companies surveyed have procedures in place to conduct background and reputation checks on business associates in local and foreign markets.

Just over a third of respondents do not have formal policy statements forbidding bribes, while almost half do not have policies or statements banning ‘facilitation payments’.

Published in International Business Attitudes to Corruption, the research findings are based on a survey of 316 general counsel and senior in-house lawyers at some of the largest companies in the world.

Failures in internal risk management

Worryingly, 13 corporate counsel respondents said there was a 90 to 100 per cent chance that their organisation would be required to investigate a suspected violation of anti-bribery laws involving an employee in the next two years. A further 60 organisations said this was ‘somewhat likely’, while just under a third said it was ‘very unlikely’.

Operational bribes were cited as a main cause of concern by 58 per cent of respondents, while 29 per cent cited the ‘classic’ risks associated with business development (such as demands for bribes to secure contracts) as a key concern.

However, the majority of respondents (91 per cent) said their organisations do not have specialised anti-corruption training for employees in high-risk areas. Almost three quarters have no anti-corruption training programmes in general.

In addition, only 40 per cent have confidential whistleblowing hotlines for employees to report concerns related to corruption.

“Resisting demands for small bribes requires a combination of concerted top-level leadership, and day-to-day ground-level determination and ingenuity,” the report says. “This is likely to be a major challenge for years to come.”

Investigating suspected violations

Dealing with local data protection laws was cited by 54 per cent of corporate counsel as their biggest challenge when conducting cross-border investigations into suspected corruption.

Two thirds said they expect data protection laws to have an increasing impact on their companies in the next year or two.

Fifty-six per cent said the challenges associated with collecting data would affect their organisations over the next two years, while 66 per cent said they expect the need to move data across borders to increase.

Reporting violations to regulators

The survey found an increased appetite among corporate counsel to report suspected corruption to regulators.

More than two thirds of respondents said there were more likely to report suspected bribery involving an employee to regulators than in the past.

Just over half said they would report a suspected bribe to regulators before conducting an investigation, even if the details were uncertain.

Less than a third said they would investigate the suspicion first and only self-report it if the violation was confirmed. Fifteen per cent said they would follow the same process, but would only report the confirmed violation if it was likely to be discovered by regulators.

“It will usually be wiser to conduct the investigation first, with a view to gathering the maximum amount of information as quickly as possible, and then report once the situation is clearer,” the report suggests.

“As soon as companies self-report, they lose control over the investigation.”

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