More than US$11b in fines fails to deter global corruption, EY survey finds

Singapore, 7 May 2018

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  • More clarity and certainty needed on intent to penalize misconduct

The scale of bribery and corruption has shown no improvement globally since 2012, despite the unprecedented level of enforcement activity and introduction of new corporate criminal liability laws in that time. This is according to the 15th EY Global Fraud Survey, which surveyed 2,550 executives across 55 countries, including 50 from Singapore.

This year’s survey found that despite regulators and law enforcement agencies around the world imposing more than US$11b of financial penalties since 2012, 38% of global executives still believe bribery and corrupt practices remain prevalent in business. 10% of the Singapore respondents shared similar perspectives.

Reuben Khoo, EY Asean Fraud Investigation & Dispute Services Leader, says:

“It is heartening to note that perception levels of bribery and corruption in Singapore is low, which affirms the anti-corruption culture that Singapore has taken effort to build over the years. In that light, companies may question the need for regulatory compliance and if it could be a barrier to growth.

On the contrary, the benefits of compliance to demonstrate integrity can actually improve business performance. Particularly as the business environment becomes more competitive and complex, management teams must continue to communicate its commitment against unethical conduct in their organizations. Compliance programs need to keep pace with the impact of rapid technological advancements and the increasingly complex risk environment on business operations. More robust risk management should be considered a strategic means of improving business performance.”

Mismatch remains between intention and performance

The survey finds that integrity sits high on the board agenda, with 94% of Singapore respondents (global: 97%) recognizing the importance of their organization being seen to operate with integrity.

Although improved customer perception, staff retention and business performance were all seen as benefits of demonstrating integrity, there remains a mismatch between intentions and actual behavior. 28% of Singapore respondents (global: 13%) say they would justify making cash payments to win or retain business.

38% of Singapore respondents (global: 22%) feel that individuals should take primary responsibility for their organization behaving with integrity, while 28% (global: 41%) say it is management’s primary responsibility.

Khoo comments: “More Singapore executives, compared with their global counterparts, believe that acting with integrity is every individual’s responsibility and not just that of management. While it is important for management to set the right tone at the top, it comes down to each individual to uphold integrity and be vigilant about unethical conduct.”

However, there may be some level of disillusionment among companies with regards to their ability to “walk the talk” when it comes to managing misconduct. Just over half (52%) of Singapore respondents (global: 78%) believe their organizations have the clear intent of penalizing misconduct. As well, only half (global: 57%) are aware of people having actually been penalized.

Khoo says: “This is a strong call for companies in Singapore to review how they communicate with their employees on their compliance policies and programs. The management needs to be very clear and consistent in communicating their compliance programs and protocols. This will help to reduce the possibility of any confusion or lack of understanding of what constitutes ethical conduct and the potential penalty of a misconduct. This will better enable employees to respond appropriately should they encounter any unethical behavior.”

According to the report, ensuring that ethical conduct is managed effectively is not only an issue that needs to be dealt with internally, but also with third parties and those acting on behalf of the organization. Yet third-party due diligence seems to be a low priority, with only 56% of Singapore respondents (global: 59%) indicating they have a tailored risk-based approach to due diligence on third parties.

Khoo says: “The pressing challenge for management and the board, therefore, is to build a robust culture of integrity and compliance in which employees do the right thing because it’s the right thing to do, and not just because a company code of conduct says they should.

“The encouraging news is that with today’s advances in forensic data analytics, companies can leverage new technologies to increase the effectiveness and efficiency of their efforts as they seek to improve investigation and compliance outcomes.”

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Notes to Editors

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About the survey

Between October 2017 and January 2018, our researchers — the global market research agency Ipsos MORI —conducted 2,550 interviews in the local language with senior decision-makers in a sample of the largest companies in 55 countries and territories. The polling sample was designed to elicit the views of executives with responsibility for tackling fraud, mainly CFOs, CCOs, general counsel and heads of internal audit.