Ernst And Young Publishes Corruption Survey

by Jason Gorringe, Tax-News.com, London

14 May 2008

Anti-corruption enforcement has become stronger around the globe over the past five years, according to nearly 70% of respondents to a new survey conducted by Ernst & Young of business leaders worldwide.

Publishing the results of the survey this week, E&Y suggested that their perceptions are supported by the fact that regulatory authorities and law enforcement are cooperating more frequently.

At the same time corruption itself remains a significant problem for business, with more than one-third of survey respondents suggesting that corrupt business practices are becoming worse. In this environment executives and board members face daunting challenges around their compliance obligations.

"Corruption or compliance — weighing the costs: the 10th global fraud survey," was released on Wednesday, and showed that although companies are recognizing the risks of corruption and are doing more to combat it, knowledge of relevant anti-corruption legislation remains patchy, undermining compliance efforts.

With 37 countries implementing the OECD Anti-Bribery Convention, understanding the different legal obligations is a challenge, the firm argued, further suggesting that given US authorities’ more aggressive and extra-territorial enforcement of the Foreign Corrupt Practices Act (FCPA), all companies need to enhance their understanding of it.

The FCPA has become the de facto international standard regarding bribery and corruption, yet only one-third of respondents claimed a good knowledge of it.

“Companies cannot afford to ignore the obligations associated with the FCPA and other anti-bribery laws. Compliance is certainly not just a matter for SEC registrants or US nationals,” explained David Stulb, Global Leader of Fraud Investigation & Dispute Services for Ernst & Young, going on to add:

“Companies and their boards that do not consider their corporate and individual vulnerability to FCPA enforcement are taking unnecessary risks.”

The survey showed that companies are increasingly waking up to the risks that corruption presents. More than half of respondents are increasing training on the subject, and 45% conduct some form of anti-corruption due diligence before making corporate acquisitions.

“Many enforcement actions arise in the context of mergers and acquisitions. Companies need to consider more robust due diligence measures, particularly when target companies are active in higher-risk countries,” continued Stulb, concluding:

“Companies should consider the potential regulatory liabilities they are acquiring relative to bribery and corruption. It’s not just about avoiding penalties – it’s about improving the business.”

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