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.