In the face of frequent revelations about corporate and political wrongdoing and corruption, the wave of public mistrust is spreading, further compelling enforcement authorities across the world to ramp up efforts to investigate and prosecute corruption. Compliance programs are becoming more important than ever in helping the fight to end this complex and ever-evolving phenomenon.
Headlines tell tales of corruption cases that could have been lifted straight from the pages of an espionage thriller; from whistle-blowers receiving threatening night-time calls, to giant oil companies, ex-MI6 agents, and political officials embroiled in allegations of bribery.
Corruption is a global phenomenon, and remains one of the most pressing challenges of our time. The World Bank estimates that $1 trillion is paid in bribes while an estimated $2.6 trillion is stolen annually through corruption – a sum equivalent to more than five percent of the global GDP – and although the precise estimate is debatable, what isn't is the effect of corruption.
Corruption does not exist in a vacuum; its reach is deep and interconnected. In the corporate world, it is often associated or facilitated by transnational crimes such as money-laundering, human trafficking, trafficking narcotics, and trade of illicit animal products and arms. Politically, it represents an obstacle to democracy and the rule of law; economically it threatens a country's wealth, often diverting money to corrupt officials' pockets, and distorts fair market competition resulting in an uneven playing field where compliant companies are effectively excluded.
One of the pervasive elements of corruption is the architecture of the international financial system. Shell companies are a prime example of this. These legal entities are designed purely to protect real owners from disclosure, liability and accountability – the basis of corruption. Meanwhile, the trickle of money into tax havens has become a flood. The total being held in offshore banks is estimated to be a staggering ten percent of global GDP and rising.
The highly collusive and hidden nature of corruption makes tackling and preventing it complex; there is no silver bullet. But more must be done at the global level to cut red tape and close loopholes that facilitate the movement of the proceeds of corruption, money-laundering, and related crimes across jurisdictions.
In November 2018, the French bank Société Générale agreed to pay over $1.3 billion to settle U.S. and French charges that it bribed Libyan officials to obtain business. It was the first-ever coordinated bribery case between the two countries.
Many other countries have made significant progress in curbing corruption. What we are seeing now is the adoption and enhancement of anti-corruption laws and accountability regulation at an ever-increasing rate, and global enforcement is starting to catch up. New standards have been agreed into law that promote the fight against corruption and made bribery and corruption a prominent issue on corporate agendas. The recent enactment of laws and standards such as the UK Bribery Act, the EU business disclosure requirements for corporations, and the International Organization for Standardization's ISO 37001 standard, which was designed to help organizations prevent and detect bribery, are cases in point.
And in the years since the US Treasury Department implemented “Section 311” of the USA Patriot Act, it has gone after the banks and front companies that help North Korea evade sanctions, and used the Act to punish banks that helped Saddam Hussein launder money, and put pressure on offshore havens, like the Pacific island of Nauru.
What's also changing is the level of consumer and stakeholder activism which has led to significant pressure on organizations to be more transparent. And with this increased public and regulatory appetite for openness, a steady stream of new accountability regulations has come into force. Regulations like the UK's Senior Managers and Certification Regime (SMCR), the U.S.'s recently passed legislation – The Senior Safe Act – and Australia's Banking Executive Accountability Regime (BEAR), are making sure firms take governance and individual responsibility seriously.
There's no arguing the fact that these laws and regulations have made, and will make, a contribution in the fight against corruption and continue to be important, but they are not enough to assure success. The corrupt have a way of beating the legal provisions and to run circles around legal institutions, in many cases evading justice. This is why business leaders, organizations and institutions need do their part to reshape the fight against corruption with a strategy that integrates the challenge of improving governance in both the public and private sectors.
Ramping up efforts from enforcement authorities to investigate and prosecute corruption as well as the increased pressure from consumers and shareholder activists has sharpened organizations' focus on having robust anti-bribery and anti-corruption compliance programs in place. Whereas previously organizations viewed corruption policies and procedures as 'nice to have' but not 'essential', the review and implementation of programs and instilling a proper anti-corruption culture has not only been pushed up the corporate agenda but is also becoming the credo of organizations.
Creating a culture that influences employees' actions, decision-making and behavior can be a challenging and lengthy process, requiring sensitivity, patience and resources. Corruption can be so ingrained into a company's culture as to be considered simply 'the way business is done'. As Tim Leissner, Goldman Sachs's former chairman of Southeast Asia, admitted in a plea that he bribed officials to get bond deals and said “a culture of secrecy” at the investment bank, led him to conceal wrongdoing from compliance staff.
"Anti-corruption compliance is not just a question of checking boxes and it shouldn’t happen only when things go wrong. Taking a proactive approach to compliance by putting in place strong controls and making anti-corruption compliance part of one’s corporate culture is the best way to prevent corrupt acts before they happen."
Fostering an open culture of disclosing wrongdoing in the workplace necessitates an integrated approach. Visible support from leadership should not be underestimated. If senior leadership declare a zero-tolerance approach to bribery and corruption, they must demonstrate they will support employees if they lose contracts or business in the short-term as a result. By creating a culture of integrity and openness – where ethical dilemmas arising from doing business in corruption hotspots are discussed, and employees feel supported to do the right thing – then an organization can help mitigate against the risk of an ethical lapse.
A modern approach to employee learning is a key component in the fight to tackle corruption. If employees are not equipped to know and report criminal activity then the organization risks potential reputational failure, years of investigations, and the possibility of billions of dollars in fines. This is why organizations need to foster a risk-aware and judgement-based ethics and compliance company culture, where the promotion of core values, setting of expectations, and the provision of incentives is clearly supported, nurtured, and embedded in the company as robust, repeatable processes.
The consequences of corruption are undoubtedly damaging – at its core, the erosion of trust prolonging conflict, enabling violent extremism, crippling development and destabilizing economies – undermining the legitimacy of our political systems and destroying brand resilience. But the process of change we are seeing across the globe provides a promising roadmap for the battle against corruption. Policy and enforcement efforts will continue to shift the landscape of compliance for organizations and business leaders.
Only by continuing to think beyond anti-corruption rhetoric and traditional tactics and being more strategic and rigorous in addressing, identifying, and mitigating against bribes and corrupt payments, will organizations keep markets competitive and operate as trustworthy custodians for societies in which they operate.