‘Bribery and Corruption on the Rise Since the Economic Downturn’ – Survey

Michelle Remo, “Big 4″ observer
September 28, 2012 /

Ernst & Young’s 2012 Global Fraud Survey , shows that 28% of Irish respondents believe that there is an increase in bribery and corrupt practices since the economic downturn. This compares to 16% in Western Europe. Over 1700 executives across 43 countries, including CFO’s, heads of legal and internal audit participated in the survey for their views of fraud, bribery and corruption.

The survey reveals that over 20% of Irish respondents believe that bribery occurs widely in Ireland. This compares to over a third of the global respondents viewing bribery as widespread in their country. Interesting, bribery is perceived to be significantly higher in rapid-growth markets (e.g., Brazil – 84%, Indonesia – 72%, Turkey – 52%).

Julie Fenton, Partner and head of Ernst & Young’s Fraud Investigation & Disputes Services practice in Ireland says: “Advances have been made by Irish companies in establishing frameworks and fraud related policies and procedures. In 2011, 60% of respondent’s believed senior management strongly communicated its commitment to anti-bribery and corruption policies, this figure increased by 20% (up to 80%) in 2012. However, there is still work to be done by companies in being seen to follow through on the tone from the top”.

Fifty-six percent of Western European respondents believe that people are penalised for breaching their company’s internal policies. But, only 28% of Ireland respondents consider this the case.

The survey reveals that 4% (down 12% in 2011) of Irish respondents are willing to make cash payments to win or retain business; indicating Ireland has experienced a marked improvement. Interestingly, 62% percent of Irish respondents consider it justifiable to provide entertainment to win/retain business. This compares with 50% of respondents in the UK and 26% of respondents in other Western European countries.

Fenton comments: “these statistics highlight the need for Irish companies to educate and define what acceptable and unacceptable practices are and consider the consequences for breaching policies, procedures and laws. In light of the proposed new legislation this need is imminent”.

Companies pursuing opportunities in rapid-growth markets face specific risks that are not always being managed effectively, according to the survey. For example, due diligence on third parties is expected by regulators – it is required under both the US Foreign and Corrupt Practices Act and the UK Bribery Act -, but almost half the Irish respondents (44%) reported that background checks on the ownership of third parties were not being performed. It is also concerning there is a lack of awareness on the liability a company may face from the actions of third parties.

Julie Fenton concludes: “Growth and ethical business conduct in today’s markets can appear to be competing priorities. Our findings show that, as businesses continue to pursue opportunities in new markets, many executives are underestimating the risks. Boards need to put pressure on management to conduct more frequent and more robust anti-bribery/anti-corruption risk assessments and they need more tailored reporting to drive improved compliance.”

 

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