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An Anti-Bribery and Corruption Report for 2021

Jan 20, 2022

Bribery is defined by Black's Law Dictionary as the “offering, giving, receiving or soliciting of any item of value to influence the actions of an official or other person in charge of a public or legal duty.” Corruption is a form of dishonesty or a criminal offense that is undertaken by a person or an organization that is entrusted with a position of authority in order to acquire illicit benefits or abuse power for one's personal gain.

Anti-bribery and corruption (“ABC”) policies are intended to prevent bribery and corruption from occurring in organizations. These policies should help establish boundaries to avoid incidents and provide guidelines on what to do when faced with potential situations. Kroll, a provider of governance and risk services, analyzed global data from hundreds of senior risk professionals throughout the U.S., Canada, Latin America, Europe and Asia-Pacific in 2021 and has provided insight into the current ABC landscape.

Important Findings

  • Compliance officers evaluate their compliance programs as generally effective but need more advanced technology and automation tools to support their programs.
  • A new focus revolves around environmental, social and corporate governance (“ESG”) considerations in ABC programs.
  • Evolving challenges with enhanced due diligence (high-risk countries and red flags uncovered during initial screenings are the biggest drivers).
  • Increasing concern around the critical issue of data security when conducting due diligence externally, stressing the importance of secure technology platforms.

One of the most important elements in an ABC policies’ effectiveness is culture. An organization’s culture is the bridge between what an organization defines as ethical conduct and what conduct occurs. It starts with the “tone from the top,” a phrase that accountants are familiar with when discussing internal controls. The commitment needs to be embraced by management at all levels of an organization, not just at the top, for it to succeed within specific roles and functions. The chief compliance officer should design a plan to match the organization’s values rather than only consider external expectations from regulators. This plan should consider business needs and local conditions. Many organizations also consider incentivizing ethical behavior but need to ensure that incentives do not conflict with compliance policies. Organizations with strong compliance cultures integrate integrity into their performance incentives and evaluation frameworks. Without incorporating a company’s values into how it approaches ABC and incentive programs, employees may still be tempted to cut ethical corners.

While all aspects of an ESG program can be undermined by instances of bribery and corruption, approximately 60% of global survey respondents stated that ESG is currently part of their ABC programs. Respondents indicated that business ethics, along with diversity, equity and inclusion (“DEI”) were the most common aspects included in their ESG programs. A lack of commitment to DEI initiatives has been linked to labor concerns and can translate into reputational harm due to media coverage and societal perceptions. Other aspects include climate change mitigation, air and water pollution, human rights abuses and labor rights. It is interesting to note that these other aspects were ranked as more important than DEI initiatives to respondents in Asia-Pacific. This relates back to the earlier point that ABC plans need to consider local conditions, as many Asia-Pacific countries are greatly affected by weather extremes that can result in supply chain disruptions. The implementation of ESG into ABG programs has its benefits, but it does not come without some challenges. Global respondents indicated that the cost and lack of standardization are two of the greatest challenges as to why they struggle to implement these initiatives. Limited data and lack of transparency or regulation are two other challenges respondents face.

Social media has gained an increasing role in due diligence checks. Social media checks are being used more frequently in managing ABC risks and more commonly found in compliance programs. Kroll’s survey revealed that more than 50% of global respondents said they used social media searches to identify or validate third-party risks. It appears that compliance professionals rely on social media more in locations where publicly available information is less assured or where organizations use social media over traditional websites to promote their services, such as in Asia-Pacific. Social media checks may help identify regulatory risks such as high-risk business, political connections, insider trading risks, and connections to extremist or organized crime groups. Due diligence checks during this pandemic have been challenged by remote work, especially in places where in-person records inspections need to be done if online records are not maintained. With regards to enhanced due diligence checks, global survey respondents indicated that red flags arising from a screening database or during onboarding and operations in high-risk jurisdictions are the primary drivers. However, organizations must deal with challenges, such as compliance budgets or regulator expectations, when deciding to go this route. Kroll’s survey reported that 31% of the respondents conduct enhanced due diligence on more than half of their third parties.

One constant in ABC programs is the rise of technology, specifically automation, and how this can assist organizations by easing the burden of processes and lowering costs. Kroll’s survey revealed challenges of performing due diligence such as costs, capacity, turnover, research issues and maintaining the amount of information. Automation can be the answer to these problems. While 72% of global respondents claim they have sufficient technology to address challenges, only 36% said they use automation in the due diligence process. One explanation is how organizations define technology, which is a broad term. Automation is a specific type of technology and when utilized correctly can reduce costs and time spent while increasing speed, quality and growth. While automation could strengthen an ABC program, it is up to the organization to decide which technologies are right for them.

Looking Ahead

Due to the ongoing pandemic, now is the time to prepare for what a “new normal” will look like for an organization’s compliance culture. If an organization’s culture of ethics and integrity was disrupted due to supply chain, financial issues or remote work, it is time to rethink and make appropriate changes to any ABC programs already in place or consider implementing one if there isn’t. The effectiveness of any changes or new programs will depend on how they relate to the specific needs and the individual organization. Although the survey indicates an increase in inclusion of ESG in ABC programs, there is still a long way to go in terms of implementation and managing the challenges that come with it. According to the Kroll report, ESG is set as a high priority for regulators, and ESG disclosure regulations are likely to be standardized in the future across many countries. While many organizations are worried regarding the costs to employ ESG in ABC programs, the cost of not considering ESG factors in ABC programs may be greater. With what appears to be a permanent hybrid work setting, the focus is shifting to the improvement of cyber security and IT systems, remote monitoring of third parties and process automation.

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Michael Bentivegna

Michael Bentivegna has experience in forensic accounting and complex damages analysis, with a concentration in commercial litigation matters, and forensic investigations.

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