Although company bosses are paying greater attention to risks, they still suffer significant damage, the report said. The study has clear implications for the fight against laundered money.

A global study of 1,336 senior decision-makers for risk strategy found that 72 per cent said that boards are paying increasing attention to bribery and corruption, with 82 per cent saying that the problems still “significantly” affected their organisations.

The findings come from the 2021 Global Fraud and Risk Report issued by Kroll. While it spans a variety of business sectors, the insights have clear relevance for wealth managers and private banks at a time when compliance remains a big concern.

Kroll noted that the global value of bribery is now estimated to be as high as $1.75 trillion a year, more than 1 per cent of global gross domestic product. 

Worldwide, incidents of corruption and other financial crimes continue to take a toll, with 36 per cent of organisations saying that these crimes have hit their business. The largest organisations felt the effects of this illicit activity most significantly. Kroll said there appears to be an inflexion point with firms with a turnover of $10 to 15 billion (48 per cent) or above $15 billion (57 per cent) being more likely to state that the impact is very significant.

“This may be due to more complex company structures and supply chains, which in turn makes it harder to maintain visibility,” Kroll said. 

“The risk of bribery and corruption also cannot be considered in isolation; it frequently goes hand in hand with other financial crimes, particularly fraud and money laundering. For instance, paying bribes often uses the same mechanisms to release cash as fraudulent activities and the process for disguising corrupt payments involves an inherent element of money laundering,” the report said. 

Miles apart
The wide physical divide between distant senior management teams and their businesses hundred or thousands of miles away can make managing them more difficult. 

Organisations with overseas operations must ensure that they have the data and insight for monitoring all their business units around the globe, the report said.

Almost half (46 per cent) of respondents cite a lack of visibility over third parties - including suppliers, customers, agents and distributors - as the leading source of bribery and corruption risk. Kroll said that when firms changed their supply chains because of the pandemic, sometimes going outside the usual company channels, this added to the problem.

“Our findings only reinforce the need for organisations to maintain proper data governance and ensure they have appropriate data analytics capabilities which are aligned with their risk profile,” Kroll said

Regions
When assessing the danger of bribery and corruption around the world, fast-growth developing markets were again identified as high risk. Ranking the top three regions for the threat of bribery and corruption, respondents most frequently chose the Middle East and North Africa (61 per cent), sub-Saharan Africa (59 per cent), Latin America (49 per cent) and Asia-Pacific (43 per cent).

When considering their organisations, most respondents cite a lack of visibility over third parties such as suppliers, customers and distributors (46 per cent) as presenting the greatest threat of bribery and corruption. In contrast, internal risk areas such as weaknesses in record keeping (31 per cent) or employee actions (23 per cent) are regarded as less significant sources of risk.

A lack of visibility over third parties is considered an even greater risk in more developed economies, such as Canada (56 per cent), the US (53 per cent) and the UK (49 per cent) - markets that are increasingly dependent on complex international supply chains.

Kroll said that 60 per cent of the organisations have annual revenues of $250 million or more, and 34 per cent have more than $1 billion in such revenues. Survey respondents came from the 17 countries, and the survey was conducted in March 2021.