Are Companies Winning the Fight Against Corruption?

Bribery and corruption have never been more topical issues. The fight against corruption is top of the agenda in jurisdictions as diverse as the US, Brazil, Guatemala, Malaysia, the PRC, Nigeria, Tanzania and the UK. The Panama Papers and Luxleaks have increased public awareness of how high-secrecy jurisdictions can be abused for tax avoidance and money laundering. Against this backdrop, Eversheds spoke to 500 business leaders across 12 jurisdictions to discuss their experiences of dealing with bribery risks.

Risky Business

A recently released report by Eversheds, Beneath the Surface: The Business Response to Bribery and Corruption 2016 has identified a number of positive developments in the fight against corruption. For example, 95 percent of companies regard corruption as an important issue and 90 percent would reject future business opportunities if the associated bribery risk was too high.

However, the survey also highlighted some alarming trends: while 90 percent of respondents would reject tainted business opportunities, 10 percent of senior management were unconcerned by corruption risk. In mainland China, 28 percent of respondents neither agreed nor disagreed on this point which suggests that President Xi Jinping’s anti-corruption campaign is not yet having the desired impact.

Of more concern was the fact that only 32 percent of business leaders understood their organisations’ anti-bribery policy. The “tone from the top” is critical in setting the standard for how an organisation will treat corrupt, or potentially corrupt, activity.

Another issue noted in the report was knowledge gaps. In Hong Kong, Singapore and China, around a third of respondents admitted that they did not undertake anti-corruption due diligence as part of an M&A transaction. This suggests that many organisations across the region are exposed to regulatory risks and costs that can arise from acquiring another organisation that is potentially tainted by corruption.

Ninety-nine percent of all respondents said they would self-report a bribery issue. While at first glance, this is encouraging; it raises concerns because few respondents understand how self-reporting works. A failure to seek professional advice before self-reporting could have serious results, specifically when a self-reported activity could span multiple jurisdictions. The report identifies a lack of education as one of the key factors underpinning this trend, with only 12 percent of respondents confirming they had received adequate training on escalation and reporting procedures.

The Business Case for Fighting Bribery

The main reason respondents cited for taking bribery seriously was the risk to their business rather than a fear of prosecution. This finding is supported by the results of a Harvard Business School study. The researchers found that organisations operating in high risk markets with strong anti-bribery controls grew 11.5 percent more than companies with weaker systems. In the past, many in-house counsel have struggled to convince senior management of the business need for implementing and enforcing a robust anti-bribery programme. This research indicates that investment in anti-bribery programmes will recoup the costs.

Anti-corruption is a priority for governments and regulators and a topical issue for the media. In-house counsel must reinvigorate the debate to ensure that adequate anti-corruption programmes are in place, that they are reinforced by regular training and any potential misconduct is dealt with swiftly by experienced investigators. The alternative is to risk a loss of business, reputational damage and potential enforcement action.

Jurisdictions

Senior Associate, King & Wood Mallesons (Hong Kong)

Leonie Tear is a senior associate in Hong Kong, specialising in multi-jurisdictional financial crime investigations and compliance advisory. Tear has led a number of internal investigations on behalf of corporates, financial institutions and individuals being investigated by a range of prosecuting authorities. She has led financial crime compliance reviews for multi-national companies, stress testing AML, sanctions compliance and anti-bribery systems and controls against global best practice. Tear is qualified to practice in Hong Kong and England & Wales.