Mitigating the impact of corruption and bribery: Practical steps to take

According to the World Economic Forum, corruption costs developing countries $1.26 trillion every year, a staggering figure that highlights the devastating impact of this illegal activity. Unfortunately, the problem is not limited to developing countries, as according to the above statistics, half of the EMEA (Europe, Middle East and Africa) population finds corruption acceptable. This is a worrying trend that should be addressed by financial crime professionals and anyone else who wants to promote ethical and sustainable business practices.

Corruption and bribery are not just abstract concepts – they are real-life issues that affect individuals, organisations and entire societies. Unfortunately, these illegal activities can be difficult to detect and prevent and can have far-reaching consequences.

Here are some real-life examples of corruption and bribery that have rocked the world and show the scale of the problem:

📌 Corrupt Moldovan judges were part of a Russian money laundering scheme that laundered between $20 and $80 billion in criminal funds from Russia to the European Union and the rest of the world.

📌 The 1MDB Fund was created for the benefit of the people of Malaysia. However, it is estimated that over $4 billion has been misappropriated by politicians and other politically influential people. Some of the funds were used to finance the film ‘The Wolf of Wall Street’.

📌 Documents from Panama revealed that Mossack Fonseca, a Panamanian law firm, created 214,000 shell companies for people who wanted to keep their identities hidden, including many politicians and public officials. Some of these people have been sanctioned.

📌 Teodorin Obiang, son of the former president and also vice-president of Equatorial Guinea, was found guilty of embezzling public funds. 24 of his supercars were confiscated along with other assets.

📌 The European Parliament has been rocked in one of the biggest corruption scandals. Four people have been arrested and charged with “participation in a criminal organisation, money laundering and corruption” in a case involving Qatar.

These examples show how these illegal activities can take many forms and affect different parts of the world, even countries or regions considered to be at lower risk of corruption.

Corruption and bribery can have a range of negative effects on individuals, organisations and societies. Some of these effects include:

Compliance with laws and regulations

It is no secret that corruption and bribery are bad news for business. In fact, they are illegal in most countries and can lead to large fines, imprisonment and damage to a company’s reputation. To avoid these risks, businesses need to take them seriously and put measures in place to protect themselves. By doing so, businesses can protect their reputation, finances and relationships with customers, partners and investors.

Reputational effects and brand image

When it comes to running a successful business, maintaining a good reputation is essential. Corruption and bribery can seriously damage a company’s reputation and relationships with stakeholders such as customers, partners and investors. That is why it is so important for businesses to implement effective measures to combat corruption and bribery. And, protecting a company’s reputation is crucial to its long-term success.

Financial losses

Corruption and bribery pose significant financial risks to businesses. These unethical practices can lead to fraud, embezzlement and extortion, all of which can result in serious financial losses. By taking measures to fight corruption and bribery, businesses can protect their financial resources and assets and avoid the negative impact of these crimes.

Ethical considerations

Corruption and bribery run counter to the values and principles that businesses stand for, which can erode trust between stakeholders. By prioritising ethical behaviour and integrity, businesses can create a culture of transparency and accountability that fosters trust and loyalty among stakeholders.

Preventing corruption and bribery requires a comprehensive approach that encompasses a range of effective measures, including policies, procedures and risk management tactics.Below we offer some practical steps that financial crime professionals can consider on how to prevent corruption and bribery in their organisations.

1️⃣ Develop a strong code of conduct

A code of conduct sets out the principles and ethical standards that an organisation expects employees and stakeholders to uphold. The code of conduct should include specific policies on corruption and bribery, outlining what is and is not acceptable behaviour. By clearly articulating the organisation’s expectations for ethical behaviour, a code of conduct can help prevent corrupt activities by creating a culture of transparency and accountability.

2️⃣ Provide regular training

Regular training sessions can help employees understand the risks of corruption and bribery and how to identify and prevent these offences. Effective training and awareness-raising efforts can prevent corruption and bribery in an organisation.

3️⃣ Due Diligence

Conduct due diligence on third party partners, including suppliers, vendors and agents, to ensure that they have not been involved in bribery or corruption in the past.

4️⃣ Whistleblowing system

Implement a whistleblowing system that allows employees to report any suspicions of bribery or corruption without fear of reprisal.

5️⃣ Segregation of duties

This is one of the most effective controls to prevent corruption and bribery. Segregation of duties ensures that no one employee has complete control over a particular process or transaction, reducing the risk of fraud or corruption.

6️⃣ Risk assessment

Conduct regular risk assessments to identify areas where the company is most vulnerable to bribery and corruption.

7️⃣ Monitoring and oversight

Establish a monitoring and supervision system to ensure that all employees comply with the company’s anti-bribery and corruption policies.

8️⃣ Audits and reviews

Conduct regular internal audits and reviews to identify potential weaknesses in the company’s anti-bribery and anti-corruption controls and take corrective action as necessary.