12th Global Fraud Survey Growing Beyond: a place for integrity
Regional insights: Eastern Europe
Eastern European countries lag behind in ABAC commitment
Q: For each of the following, please tell me whether it applies or does not apply to your organization, or whether you don’t know?
Base: All respondents (1,758) / Base: Eastern Europe respondents (405)
(Eastern Europe countries surveyed: Latvia, Lithuania, Estonia, Czech Republic, Hungary, Poland, Romania, Russia, Turkey and Ukraine)
The “Don’t know” and “Refused” percentages have been omitted to allow better comparison between the responses given.
Our respondents indicated that businesses in Eastern Europe are the least likely to have a compliance or internal audit function.
Exports to the Eurozone and easier access to foreign currency loans played a major role in the economic growth of Eastern Europe prior to the 2008 financial slowdown.
More recently, the Eurozone crisis has made access to credit difficult, made it harder to reduce existing debts and weakened local currencies. The result is that many East European economies now face significant challenges.
The last few years have also seen a substantial increase in Western (particularly US) regulatory enforcement relating to business conduct in the region. In some cases local regulators have provided cooperation, while in others they have brought their own actions.
The Polish enforcement agencies in particular have started to take more robust steps in tackling bribery and corruption. The Central Anti-Corruption Bureau (CBA) has been leading this effort, including a systematic enforcement approach focusing on high-risk industries such as life sciences, defense and technology.
Better guidance, better governance
The increase in enforcement activity, however, has not convinced our East European survey respondents that fraud, bribery and corruption will be prosecuted. Only 14% of respondents think that national regulators were willing and effective in securing convictions. Of those who think the authorities were not willing to prosecute, 48% feel that this is due to bribery and corruption being too widespread.
Recognize the local attitudes towards compliance and internal audit
According to those interviewed, Eastern Europe trails behind other regions in the use of anti-fraud and ABAC measures. For example, the East European organizations sampled in our survey are less likely to have ABAC policies, clear penalties for policy breaches or to hold training when compared to the global average.
This is also reflected in organizational challenges. Our respondents indicated that businesses in Eastern Europe are the least likely to have a compliance or internal audit function. The data also showed that East European respondents were the most likely to lack confidence that these functions can effectively protect the business from fraud, bribery and corruption risks.
Our experience supports this. Compliance is changing from being an aspect of corporate jargon to an integral component of corporate culture — but only slowly.