Many Anticorruption Programs Fall Short

KPMG Poll: Many Anticorruption Programs Fall Short

 

June 10, 2011

While awareness is growing about the dangers posed by bribery and other forms of corruption in various countries around the world, many U.S. and U.K. companies still have gaps in the programs they put in place to mitigate such risks, according to a newly released survey by KPMG International.

 

The survey’s findings point out these shortcomings:

• One in five respondents said their companies don’t have anti-bribery communication and training programs.
• One in two of the respondents’ organizations do not have a committee responsible for overseeing anti-bribery and corruption compliance.
• Three in four U.S. and three in five U.K. respondents said their organization does not have a full-time officer dedicated to antibribery and corruption compliance.
• A third of the companies do not perform antibribery and corruption risk assessments.

 

And despite the known compliance risks of working with third parties in some countries, the survey also found:

 

• Two in five U.S. and U.K. organizations with written antibribery and corruption policies do not distribute them to agents, distributors, vendors, brokers, joint-venture partners or suppliers.
• Three in five companies with compliance programs that incorporate employee training do not require any third-party representatives to participate.
• Nearly one in three U.S. and one in four U.K. companies require training less than once a year.
• Three in five companies do not exercise “right to audit clauses” in third-party contracts.
• More than 50% of the U.S. and 10% of the U.K. companies do not obtain periodic compliance certifications from those with whom they do business in other countries.

 

“Many multinational companies seeking to expand their markets or supply chains to certain areas of the world often are met there by an official with their hand out looking for a bribe or some other favor,” said Adam Bates, global leader of KPMG’s Forensic Services in a press release. “Doing the right thing becomes even more difficult when facing increased stakeholder expectations for a better return on investment,” he added— a situation that puts pressure on companies to expand into new global markets quickly in order to stay competitive.

 

In addition, while both the U.S. and the U.K. now have stringent antibribery and corruption laws—the U.S. Foreign Corrupt Practices Act of 1977 (FCPA) and the U.K. Bribery Act of 2010—the KPMG survey found that only 43% of U.S. executives said their programs comply with the U.K. Bribery Act, while 46% of U.K. executives said their programs comply with the FCPA. In addition, nearly 80% of U.S. respondents said they still have little or no knowledge of the U.K. Bribery Act’s provisions, while 32% of the U.K. executives don’t understand the U.K. law’s requirements.

 

Signed into law on April 8, 2010, the U.K. Bribery Act goes into effect on July 1 of this year. The KPMG survey was conducted in October and November of 2010, about six months after the act’s passage.

 

While a majority of U.S. and U.K. compliance executives said bribery and corruption are part of doing business in some countries, most companies have not abandoned operating in such risky locations, according to the poll. To cope with these practices, companies are taking precautions that include improving internal controls, enhancing due diligence and expanding employee training.

 

Some 73% of U.K. senior compliance executives and 70% of their U.S. counterparts polled said corruption is endemic in many countries throughout the world, although the survey did not mention specific countries. But only 32% of the U.K. respondents and 25% of U.S. respondents said they view not doing business in those nations as a way to avoid bribery and corruption.

 

“Rather than sidestep certain markets, our poll finds that many leading companies have implemented risk mitigation programs that range from increased employee training about ethical cultures and doing the right thing to enhanced internal controls and keeping a closer eye on operations,” said Michael Schwartz, who leads Anti-Bribery and Corruption Services for KPMG LLP, the U.S. member firm of KPMG International.

 

Companies that chose education and enhanced controls “were able to enter and operate in more diverse markets,” Schwartz said. However, he added, expansion in some areas of the world is not easy. Challenges include the difficulties associated with investigating the backgrounds of local business partners and dealing with a growing maze of foreign laws and regulations.

 

Participating in the survey were 214 U.S. and U.K. executives with antibribery and corruption responsibilities in companies with 200 or more employees and more than $300 million in revenue in the U.S. and £200 million in the U.K.