Author: Roderick M. Vega

This was the key finding of the recent EY 14th Global Fraud Survey titled Corporate misconduct — individual consequences, which includes insights from 2,825 senior executives from 62 countries and territories. The group included chief financial officers, chief compliance officers, heads of internal audit and heads of legal departments who provided their views on the impact of fraud and corruption on business globally.

FIGHTING CORRUPTION IS BECOMING A GLOBAL PRIORITY

The year 2016 has shown an increasing level of cooperation between governments and multi-lateral institutions in combating corruption. This is evidenced by the concerted efforts to apply international standards on transparency on company ownership by the World Bank and Group of 20 (G20) member countries. The G20 outlined its priorities in the 2015-2016 G20 Anti-Corruption Action Plan, identifying key areas where economies and multinational organizations must strengthen their cooperation.

Among the key issues identified, the G20 highlighted the abuse of legal and corporate structures to hide or conceal criminal activity as one of the most critical areas of concern. This coincides with the survey’s findings that 91% of respondents believe that it is vital to know the ultimate beneficial ownership of the entities with whom they do business.

The G20 has also committed to increasing international cooperation in areas of particular exposure such as public procurement and customs controls. This is supported by major companies from the G20 members that participate in the Business 20 (B20) platform and believe that “requiring that all legal entity bidders disclose information on the real people who own or control them can help forestall one of the most common corruption schemes which enable bidders to hide their conflicts of interest and some government officials to enrich themselves.”

Given the frequency of such issues being reported in Philippine media, this bidding requirement is something that our national and local leaders may wish to participate in or consider adopting.

BRIBERY AND CORRUPTION ARE STILL ONGOING CHALLENGES

The worldwide scale of bribery and corruption is still significant. Despite the increasing efforts of governments to fight corruption, a significant number of the survey’s respondents feel a lack of effective enforcement in emerging markets. In fact, many respondents felt that the global situation has not significantly improved in the last two years, with 39% of the respondents considering bribery and corrupt practices as widespread occurrences in their respective countries. It is interesting to note that the respondents consider the situation worsening in developed countries, where perceptions of bribery and corruption have increased from 17% to 21%. This is in contrast to the trend seen in emerging markets where results indicated a small improvement in the prevalence of bribery and corruption from 53% to 51%. We should note, however, that the worsening view in developed markets may be due to the increased awareness and publicity of high-profile cases which affected major US and European corporations, rather than an actual increase in the number of incidences.

Many respondents also held the view that while governments are generally willing to prosecute incidences of bribery and corruption, they have not been very effective in securing convictions. This is further compounded by the view of most respondents that bribery and corruption are less likely to exist in their respective business sectors — they think that bribery and corruption are someone else’s problems, with only 11% of the respondents believing that they happen in their sector. Since this seems to contrast with the survey results, it raises the question of whether some of the survey respondents are unclear as to what constitutes improper actions, or perhaps, they do not see certain practices as corrupt. The survey reveals that there is still a persistent minority of executives who are willing to justify certain unethical business practices in an economic downturn, which boards and other stakeholders should note:

Original Source: BusinessWorld Online