Compliance
Kroll, Institute Find Global Compliance Professionals Are Nervous Over Corruption Risk

A recent report finds that risk and compliance professionals are concerned that dangers of bribery and corruption are either as serious as last year, or in some cases, likely to get worse.
More than a third (35 per cent) of risk and compliance
professionals from around the world who were polled recently by
Kroll, the risk
mitigation firm, and the Ethisphere Institute, a think tank and
advocacy group, expect risks from bribery and corruption to rise
this year. And more than half (57 per cent) said they expect
these risks to be at the same level as in 2016.
The details came in the 2017 Anti-Bribery and Corruption
Benchmarking Report, with the theme of Beyond Regulatory
Enforcement: The Rise of Reputational Risk. The survey
produced 388 complete and partial responses. Nearly half of
respondents (44 per cent) represented publicly listed companies;
an additional 43 per cent represented privately held companies,
and 13 per cent identified their organizations as a non-profit or
other type of organization. The majority of organizations were
headquartered in North America (43 per cent), followed by the UK
(14 per cent), Western Europe (14 per cent), Brazil (8 per cent),
and Australia/New Zealand/Pacific Islands (7 per cent).
Some 30 per cent of respondents held the title of compliance and
ethics officer or chief compliance officer, followed by director
(17 per cent).
With the wealth management industry acutely aware of dangers from
money launderers, bribes and cybersecurity, the need for tight
controls and strong oversight is high on the agenda.
Organizations such as smartKYC give managers, among other
services, potential “red flags” over clients who are deemed
potential high risks, as in the case of politically exposed
persons, or PEPs. Another firm in a simiar space is LexisNexis
Risk Solutions. Appway, an onboarding specialist that is
headquartered in Zurich, has worked with a range of firms to
develop systems to bring in clients efficiently while doing
necessary background checks and analysis. And the aforementioned
Kroll also provides services to scrutinize money and carry out
due diligence. This sector is a booming area within fintech,
consultancy and legal services.
The Kroll report, meanwhile, also found that the top risks to
their anti-bribery and corruption programs will come from third
party violations (40 per cent), a complex global regulatory
environment (14 per cent), and employees making improper payments
(12 per cent).
General reputational concerns went from being the least likely
reason identified in last year's report for a third party to fail
a company's vetting standards to being the most likely
reason.
"It is clear the anti-bribery and corruption program can be
viewed in the context of regulation, as well as more broadly as a
means of protecting an organization's most valuable asset - its
reputation," Steven Bock, managing director and head of
operations and Research with Kroll's compliance practice.
In a related development, the survey data suggests senior
leadership's engagement regarding anti-bribery and corruption
efforts is on the rise. Some 51 per cent of respondents state
senior leadership at their organization is "highly engaged" with
anti-bribery and corruption efforts, a 4 per cent increase over
the previous year.
"All research points toward a clear link between ethics and
performance, and with more involvement from leadership, we are
seeing that anti-bribery and corruption efforts are being
prioritized," added Erica Salmon Byrne, EVP and executive
director of business ethics leadership alliance at
Ethisphere.
Another strong trend that emerged in this year's report is the
dependence on ongoing compliance monitoring to capture
post-onboarding bribery and corruption issues. More than half (55
per cent) of respondents report they identified legal, ethical,
or compliance issues with a third party after conducting initial
onboarding due diligence. In 40 per cent of these cases, the
issue that was later identified did not exist at the time of
initial onboarding.
The value of ongoing monitoring is reflected in the level of
confidence that survey-takers have in their anti-bribery and
corruption programs. Nearly 80 per cent of those respondents who
monitor all of their third parties, regardless of risk profile,
believe they are either extremely or appropriately prepared to
address global bribery and corruption risks. Conversely, feelings
of preparedness drop as the level of ongoing monitoring goes
down.
The report also includes the following findings: 49 per cent of
respondents showed concern that they did not have enough
resources to support anti-corruption efforts; one-third of
respondents reported having a greater level of concern about
personal liability than the prior year; 26 per cent of
respondents said issues that were identified at the time of third
party onboarding were not adequately addressed; 67 per cent of
respondents reported engaging in M&A in 2016, but conducted
lesser levels of due diligence on targets or targets' third
parties than expected.
Meanwhile, some 37 per cent of chief financial officers said they
maintain an active role in developing their organization's
anti-bribery and corruption programs. The 2017 ABC Report was
publicly released today at Ethisphere's Global Ethics Summit in
New York, NY.