Global Cooperation Raising Fraud Risk Focus

by FEI Daily Staff

Expanding international cooperation and a shift toward prosecuting individual executives are prompting companies to take a closer look at their anti-bribery, corruption and fraud risk management efforts.


According to EY’s Global Fraud Survey 2016, 39 percent of financial executives worldwide said bribery and corrupt practices are routine in their country, and 32 percent cited concerns about corruption within their organization.

Comparing these results with a similar survey two years ago is less than encouraging, with overall concerns remaining consistent and perceptions of fraud problems in developed countries getting worse (21 percent in 2016, compared with 17 percent in 2014). Respondents suggested slight improvements in emerging markets, from 53 percent citing concerns in 2014 and 51 percent in 2016.

“Business leaders are right to be focused on securing a deeper understanding of their clients, partners and suppliers,” said David Stulb, EY’s global leader of fraud investigation and dispute services, in a statement. “Enhanced transparency is clearly a focus of broad public interest.”

The steady nature of the bribery and corruption problem is prompting governments worldwide to launch anti-fraud initiatives. For example, the U.S. Justice Department announced plans via the 2015 Yates Memo to prosecute individual executives suspected of wrongdoing, and to prompt corporations to provide “all relevant facts” related to employees suspected of misconduct.

Similarly, the G20 nations announced an action plan last year to strengthen cooperation between governments as well as with multinational corporations in fraud and bribery, including the use of corporate structures to conceal illegal activity, public entity procurement and customs controls. Among the planned actions is an increased focused on identifying the ownership of companies and assets to reduce potential corruption risks.

Corporate Attention

As more governments announce plans to cooperate on anti-corruption initiatives,  the importance of managing bribery and fraud risks increases for companies and their boards. The survey highlighted exposures such as entering markets with differing expectations about acceptable behavior, evaluating third-party business partners carefully and overcoming cultural norms against whistle-blowing as challenges that must be addressed.

Among the action steps the report recommends:

  • Conduct regular fraud risk assessments, including data-driven and forensic indicators of potential fraud
  • Develop a comprehensive anti-corruption compliance and training program
  • Establish effective compliance and investigations functions before potential regulatory actions
  • Create whistle-blowing channels and policies that raise awareness and encourage employees to report misconduct
  • Conduct robust anti-corruption due-diligence on third parties before entering into a business relationship
  • Develop cross-functional cyber-breach response plan
The survey was based on interviews with more than 2,800 executives in 62 countries and territories.