Kroll fraud report highlights third party bribery and corruption risk

Half of the executives polled in an international survey have expressed concern over the risk their companies faced when dealing with overseas third parties, the recent Kroll Global Fraud Report revealed.

The Kroll Global Fraud Report surveyed over 750 senior executives from a variety of industries and countries worldwide.

Two in five respondents said they felt moderately or highly vulnerable to bribery and corruption risks.

Four in five respondents believed their organisations had become more vulnerable to fraud over the past year.

The report also found that companies had restrained their own expansion due to fears associated with third party bribery and corruption risk. Kroll found that almost 75 percent of those polled “were dissuaded from operating in a particular country or region because of the heightened exposure it would bring to fraud.”

The US Foreign Corrupt Practices Act (FCPA) and UK Bribery Act confer forum courts with extraterritorial reach – that is, the laws can catch businesses incorporated in countries other than the US and the UK – so long as there’s some connection with the jurisdiction.

So when working with third parties, companies must comply with anti-bribery and corruption frameworks to avoid detrimental reputational and legal consequences.

This means that companies must have processes in place for scoping, risk assessment due diligence and risk mitigation.

In 2013, 99 percent of all foreign bribery criminal prosecutions under the FCPA involved third parties.

Penalties under the wide-reaching FCPA and UK Bribery Act are severe.

Breaches of the FCPA may result in company fines of up to USD$2 million per violation of the Act. Penalties for individuals include up to USD$250,000 and/or sentences of up to five years’ imprisonment.

In 2013, Parker Drilling Company paid over USD$4 million to settle charges with the Securities and Exchange Commission for authorising improper payments totalling USD$1.25 million to a Nigerian agent who would later use the funds to bribe Nigerian officials.

Individuals that commit an offence under the UK Bribery Act may be subject to an unlimited fine and/or up to 10 years’ imprisonment.

GRC Solutions provides off-the-shelf and customised training in Anti-Bribery and Corruption across Australia and other jurisdictions.

Contact us today for more information.

Source: FCPA Blog