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Customer & Third Party Risk

Why quality data is a remedy for corruption ills

Warrick Beaver

08 Sep 2016

Actors portraying
Photographer: Mariana Bazo

Bribery and corruption are eating away at the global economy as if a pandemic. Tackling the disease will take time, so how can organizations protect themselves?

A recent estimate by the International Monetary Fund (IMF) put the annual cost of bribery across the world economy as high as US$2 trillion. That’s 2% of global GDP.

View the recording — Thomson Reuters Transparency Webinar Series: Bribery & Corruption, 20 September 2016 

However, as bribery is just one aspect of corruption the true cost of such activities is likey to be several times higher in both economic and social terms.

Despite this, there has been a mixed approach to tackling the problem.

Out of the 41 countries who signed the Organization for Economic Co-operation and Development (OECD) Anti-Bribery Convention, 24 have yet to issue a single sanction.

data-remedy-corruption-bribery-infographic

Download the full infographic: Enforcement of Anti-Bribery & Anti-Corruption Legislation Globally

In contrast, the U.S. Foreign Corrupt Practices Act (FCPA) has resulted in regulators tracking down corruption and bribery within company structures no matter where they operate.

The consequences of FCPA enforcement action are financial and reputational, with organizations in danger of large fines to settle cases and being ordered to put in place proper anti-bribery and corruption controls and monitoring over a determined period.

It is interesting to note that eight of the top 10 highest fines for breaches of the FCPA were by non-U.S. companies.

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Download the full PDF for the 2015 FCPA Enforcement Stats 

Proven procedures

So what can organizations do to prevent themselves or their third parties unwittingly conducting business in a way which will see them subject to enforcement action?

The search for a cure to any pandemic starts with good quality data. It plays a pivotal role in finding the source of infection, as well as the ways to contain it and treat it, and ultimately to eradicate.

One conclusion from the IMF is that anti-money laundering (AML) frameworks are central to the fight against corruption.

Therefore to minimize and assess corruption risks the same procedures should apply as for managing AML concerns. For all business relationships or new opportunities, regular screening against a leading risk database should be built into an organization’s anti-corruption procedures.

Sajja Murli Chaudhary, 45, an employee of telecom operator systems, displays an Indian currency note as he takes part in a silent protest against the telecom corruption scandal in New Delhi December 9, 2010. Officials of the Central Bureau Investigation (CBI) found what they said were
Photographer: Parivartan Sharma

However, compliance programs that focus entirely on legislation leave organizations exposed to unseen risks that can cause costly legal, financial, and reputational damage.

Sanctions warning

Having the ability to identify connections within networks is key, including the identification of the ultimate beneficial owners of a company or any links to state owned enterprises (SOEs) or politically exposed persons (PEPs).

This is because the risks of conducting business with bad actors is ever present so checks should always be made to ensure there are no links to financial crime, organized crime, or to those on sanction and watch lists within supply chains or business relationships.

A word of caution though: relying on raw data such as sanction lists can still expose your company to risk.

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How to expose risk

If a global view of customer risk and third party risk is essential, then a proven database such as World-Check risk intelligence is a must have for uncovering connections and associations.

In a recent audit of our database approximately 100,000 of those profiled on World-Check had connections to bribery and corruption.

Monitoring of more than 530 sanctions, watch, regulatory and enforcement lists and applying the appropriate keyword to these profiles, as well as many other advanced features all assist our clients to drill down and filter across varying permutations to expose risk.

PEPs and SOEs make up more than 50% of the data, including linked associates and company hierarchies.

View the recording — Thomson Reuters Transparency Webinar Series: Bribery & Corruption, 20 September 2016 

Successful treatment

As well as the breadth and quality of the information, World-Check is structured to be easy to use and fit in with an organization’s workflow or needs, whether through our direct feeds, your chosen technology platform or via managed services.

With customers including the world’s largest banks and Fortune 100 companies, World-Check risk intelligence is an essential service that supports our clients’ due diligence anti-corruption and bribery needs in identifying and mitigating risks within their business relationships.

And while there is not always a cure for pandemics, there are successful treatments. World-Check can enable organizations to address the root of the illness in their organization.

View the recording — Thomson Reuters Transparency Webinar Series: Bribery & Corruption, 20 September 2016 

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