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Anti-Corruption Day: Waging war against corruption and financial crime

Only if anti-corruption measures are large-scale and comprehensive will it be possible to prevent, detect and remediate bribery and corruption issues.

Corruption is one of the main barriers to sustainable economic, political and social growth for developing, emerging and established economies. Corruption reduces efficiency and increases inequality.

Estimates show that the cost of corruption equals more than 5 percent of global gross domestic product (USD$ 2.6 trillion, according to the World Economic Forum) with over USD$ 1 trillion paid in bribes each year (per the World Bank).  As regulation deepens in complexity and scope, the cost of compliance continues to rise. According to new figures from WealthInsight, global spending on anti-money laundering (AML) compliance is set to grow to more than USD$8 billion by 2017 (a compounded annual growth rate of almost 9 percent).

The U.S. Foreign Corrupt Practices Act (FCPA) is, at present, the most enforced anti-corruption legislation and  with a global reach. It has the most impact on companies that operate across multiple territories and have supply and distribution channels that span the globe. In August 2017, it was revealed there were 38 new FCPA-related investigations, spanning 12 countries and involving 23 different industries.

This illustrates the need for organizations to make due diligence compliance part of normal business practices. Setting up effective anti-corruption programs involves a number of crucial steps, including buy-in from the top and education across the organization. These anti-corruption initiatives must extend through all territories in which an organization operates and through to its third parties, including suppliers and distributors. Only if anti-corruption measures are large-scale and comprehensive will it be possible to prevent, detect and remediate any bribery or corruption issues that may emerge.

Repercussions of non-compliance

More than 80 percent of the FCPA enforcement actions brought during the first half of 2017 (15 of 18) were filed in January.  At the halfway point of 2017, the U.S. Department of Justice settlement cases numbered 12 compared to five at the same period in 2016. However, Securities and Exchange Commission cases resolved numbered just six compared to a massive 15 at the same period last year. As we know, 2016 was a record year for FCPA case resolutions in terms of monetary penalties imposed.

FPCA Enforcement Statistics
FPCA Enforcement Statistics

What is the answer to avoid being caught up in corrupt activities?

In November 2017, the Organisation for Economic Co-operation and Development reported in its 2016 data report on enforcement of the Anti-Bribery Convention that countries appear to be cooperating more on foreign bribery cases, with press releases showing more than 40 percent of the resolutions in U.S. foreign bribery cases involved co-operation with foreign law enforcement agencies, well up from 10 years ago.

For companies, there is a different agenda. They would prefer not to get caught up in breaching legislation in the first place.  How can they keep on the right side of the regulators?  What can they do to avoid being caught up in corrupt business practices?

What can companies do to avoid being caught up in bribery and money laundering?
What can companies do to avoid being caught up in bribery and money laundering?

Naturally, a to-do list for avoiding corruption and staying in the good graces of regulators will vary from industry to industry, and indeed from organization to organization. That being said, some general best practices include:

  • Providing internal structures, procedures, and reporting that help reduce risk and demonstrate effective compliance.
  • Clear anti-bribery-corruption messages from the executive suite, which cascade down the organization and to its third parties.
  • Employee training, skills, and knowledge-building.
  • Guidance on gifts, hospitality, promotional expenditure, and political or charitable contributions.
  • Sound financial controls.

For organizations, it is important to have a compliance strategy that is comprehensive, straightforward, and clearly communicated.

Corruption activities around the world.


Learn more

In this video, Managing Director of Risk Phil Cotter addresses the global issue of corruption and what can be done to avoid unknowingly being swept into corrupt and criminal activities.

Understanding the bribery and corruption risks posed by business partners, vendors, third parties, and potential acquisition targets is critical. Thomson Reuters can help. Explore our full suite of tools.

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