A “red flag” is a fact, event, set of circumstances, or other information that may indicate a potential legal compliance concern for illegal or unethical business conduct, particularly concerning corrupt practices and non-compliance with anti-corruption laws. These “red flag” examples should always trigger concern and appropriate review by any organisation. The Foreign Corrupt Practices Act and UK Bribery Act 2010 threaten severe penalties. But the UN still estimates that $1 trillion is paid in bribes each year, and a further $2 trillion is lost through corruption.
According to PwC’s Global Economic Crime Survey, economic crime in the UK has reached its highest level in the past 24 months. 56% of UK businesses surveyed stated that they were impacted by fraud, corruption or other economic crime. Astonishingly, this 2020 figure is the highest recorded by the survey and is well above the global finding of 47%.
In its Global Fraud and Risk Report 2019/20, Kroll reported that 27% of the perpetrators of bribery and corruption are employees and a further 22% are contractors. So how can companies prevent bribery and corruption in their business? Top of your list should be spotting the red flags that suggest that bribery or corruption could be taking place:
Unusual Compensation: Unnecessary or inappropriate purchases
Questionable Accounting or Invoicing
Continued acceptance of poorer quality
Conflicts of interest; Employee Insists on Using a Specific Contractor
Unqualified third parties
Incomplete travel and expenses
Employee Demonstrates an Unexplained Wealth Increase
Employee Rarely or Never Takes Vacation
While these examples are not exhaustive and may not in themselves constitute or indicate a violation of the FCPA or other applicable Anti-Corruption Laws, they may be indicators of potential current or future anti-corruption non-compliance. Such indicators must be evaluated to understand any actual risks, any reasonable resolution or measures which must be implemented to mitigate risk.
How to reduce risks…
- Establish, maintain, and enforce a strict anti-corruption policy
- Establish and publicize clear and harsh penalties for corrupt behavior.
- Set up an anonymous whistleblower program where employees can report instances of corruption or red flag indicators they observe in the workplace.
- Conduct employee background screenings
- Establish a monitoring system to detect and prevent corruption in high-risk employees and key functional areas of the business.
- Centralize compliance operations with software technologies.
- Watch out for over-inflated invoices well above market rates.
- Ensure adequate oversight and monitoring of all business relationships.
- Ask questions if you see any unexplained costs or charges before signing off.
- Insist on group decision-making for procurement contracts – no single person should have overall control.
- Arrange adequate oversight and monitoring of supplier relationships – with regular performance audits.
- Conduct due diligence on all suppliers to ensure they have a proven track record and have the resources/experience required to deliver the offered goods and services.
- Implement a system for employees to register potential conflicts of interest.
- Only make appointments and procurement decisions based on merit
- Remove any employee with a close personal relationship or connection to the supplier from the decision-making process
- Be aware of biases (e.g. halo effect, affinity bias, unconscious bias) and how they may impact decisions. Bias and stereotyping can be reduced by involving more people in decision-making.
- Ask questions if something doesn’t add up – wilful blindness is no defence.
- Ensure that claims for travel and expenses are backed up with necessary documentation and authorised by a local manager first.
- Implement an expenses policy and threshold – and regularly raise awareness of the rules; ask questions – particularly for unjustified expenses or repeat costs.
Anti-Bribery Anti-Corruption (ABAC®) Center of Excellence is an independent certification body that provides education and certification services for individuals and organisations on a wide range of disciplines and ISO standards, including ISO 31000:2018 Risk Management- Guidelines, ISO 37000:2021 Governance of Organisations, ISO 37002:2021 Whistleblowing Management System, ISO 37301:2021 (formerly ISO 19600) Compliance Management system, Anti-Money Laundering (AML) and ISO 37001:2016 Anti-Bribery Management Systems.
ABAC® is accredited by the United Kingdom Accreditation Service (UKAS CB number: 10613) against ISO/IEC 17021-1:2015 Conformity assessment — Requirements for bodies providing audit and certification of the scheme’s management systems of ISO 37001:2016 Anti-Bribery Management Systems (ABMS). This makes ABAC® Certification the leading accreditated certification body specialising in global anti-bribery and anti-corruption, risk and compliance management system standards. ABAC® experts audit any existing compliance and anti-bribery anti-corruption management systems to assess effectiveness and vulnerabilities while ensuring your organisation complies with Internal Standards, FCPA, UK Bribery Act, Anti-Money Laundering regulations, and all other global, regional and local regulations while maintaining a competitive edge in the world marketplace.
ABAC® Center of Excellence, powered by CRI® Group, educates, equips and supports the world’s leading business organisations with the latest best-in-practice risk assessments, performance assessments, systems improvement and standards Certification.
ABAC® offers a complete suite of solutions designed to help organisations mitigate the internal and external risks associated with operating in multi-jurisdiction and multi-cultural environments while assisting in developing frameworks for strategic compliance programs.
If you seek to validate or expand your existing compliance frameworks to maintain a competitive edge in the world marketplace, ABAC® can help you. Our experts audit your existing compliance and anti-bribery anti-corruption management systems to assess effectiveness and vulnerabilities while ensuring your organisation complies with Internal Standards, FCPA rules, UK Bribery Act laws, Anti-Money Laundering regulations, and all other global, regional and local regulations.