Russia, Africa Top Hot Spots For Global Corruption Risks

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By Yin Wilczek

May 7 — Multinational companies face the greatest corruption risks in Russia and Africa, according to a recent survey.

Seventy-five percent of in-house counsel and compliance officers in eight major countries who responded to the survey identified Russia as posing the greatest corruption risk, followed by Africa at 59 percent. China was next at 53 percent, then Brazil at 41 percent.

Seventy-seven percent of the respondents also said Russian anticorruption laws were ineffective, while 75 percent said the same for Africa. Chinese laws were described as ineffective by 69 percent.

Moreover, 62 percent of the respondents said it was impossible to do business in Russia without engaging in corruption, while 53 percent expressed the same sentiment about Africa.

AlixPartners released its third Annual Anticorruption Survey May 4. The executives surveyed were from companies with annual revenues of $150 million or more operating in a broad range of industries based in North America, Europe and Asia.

China, Brazil

In recent years, two corruption hotspots—China and Brazil—have taken steps to improve their antibribery regimes.

Meanwhile, fines under the U.S. Foreign Corrupt Practices Act have increased significantly. Although only 10 companies entered into FCPA settlements with the Securities and Exchange Commission and the Department of Justice in 2014, the year yielded the second highest amount of fines and penalties—$1.565 billion—in the statute's history.

U.S. law enforcers also have ramped up their scrutiny of third party use. This may be having an impact: almost a third of the survey respondents (28 percent) indicated that they stopped doing business with a partner or other counterparty because of bribery concerns.

Compliance Programs

As to compliance programs, 81 percent of the respondents said their companies had dedicated anticorruption programs or written anticorruption policies. However, 22 percent said their programs had not been reviewed for more than a year, while 48 percent said their policies had not undergone a third-party risk assessment.

Most of the respondents also said they were confident or somewhat confident about their antibribery due diligence procedures. They indicated that the top three limitations on due diligence were access to information (cited by 54 percent of the respondents), the large number of third parties to be reviewed (41 percent) and costs (37 percent).

Harvey Kelly, managing director of AlixPartners’ Financial Advisory Services practice, said in the report that an anticorruption program should be no excuse for complacency.

“Companies that engage senior leadership and their Boards; that regularly review their anticorruption programs with fresh eyes; that provide ongoing training; and that support and promote whistleblower programs have the greatest potential for mitigating the significant financial, operational, and reputational risks that corruption poses,” he said.

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com

The survey results are available at http://tinyurl.com/pqbqptx.