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Home News World Majority of U.S. and U.K. Execs Say Corruption Still Hampers Ability to Expand, Do Business in Some Countries: KPMG Poll

Majority of U.S. and U.K. Execs Say Corruption Still Hampers Ability to Expand, Do Business in Some Countries: KPMG Poll
added: 2011-06-02

While a majority of U.S. and U.K. compliance executives say bribery and corruption remains part of doing business in some countries, most companies have not abandoned operating in such places; instead they have chosen to take precautions that include improved internal controls, enhanced due diligence and employee training, according to a new KPMG International poll.

Some 73 percent of U.K. senior compliance executives and 70 percent of their U.S. counterparts say corruption is endemic in certain areas of the world, the KPMG poll found. However, only 32 percent of the U.K. respondents and 25 percent in the United States acknowledge not doing business in those nations as a way of avoiding bribery and corruption risks.

"Rather than sidestep certain markets, our poll finds that many leading companies have implemented risk mitigation programs that range from increased employee training about ethical cultures and doing the right thing, to enhanced internal controls and keeping a closer eye on operations," said Michael B. Schwartz, who leads Anti-Bribery and Corruption Services for KPMG LLP, the U.S. audit, tax and advisory firm.

"Companies that chose education and enhanced controls were able to enter and operate in more diverse markets, while others simply limit their potential," said Schwartz. He pointed out, however, that expansion in some areas of the world is not easy.

The KPMG survey, conducted among 214 executives in the United States and the United Kingdom, found that companies operating in countries with corrupt reputations face significant challenges, such as having the ability to adequately investigate the backgrounds of local business partners and dealing with the growing variety of foreign laws and regulations.

"Even as awareness grows among survey respondents about the business and legal imperatives for well-developed anti-bribery and corruption compliance programs, the survey findings and our experience shows there are still numerous ways that companies can improve their compliance efforts to reduce bribery and corruption risks around the world," said Richard H. Girgenti, who leads KPMG's U.S. Forensic Services practice.

According to the survey respondents, despite the known compliance risks of working with third parties in some countries, the survey found:

•Two in five U.S. and U.K. organizations with written anti-bribery and corruption policies do not distribute them to agents, distributors, vendors, brokers, joint-venture partners or suppliers.

•Three in five companies with such compliance programs that incorporate employee training do not require any third-party representatives to participate in the training.

•Nearly one in three U.S. and one in four U.K. companies require training less than once a year.

•Three in five companies do not exercise "right to audit clauses" in third party contracts.

•More than half of the U.S. and 10 percent of the U.K. companies do not obtain periodic compliance certifications from those with whom they do business in other countries.

The KPMG survey also pointed to significant shortcomings in how companies develop, implement and maintain anti-bribery and corruption policies:

•One in five respondents said their companies don't have communication and training programs.

•One in two of the respondents' organizations
does not have a committee responsible for overseeing anti-bribery and corruption compliance.

•Three in four U.S. and three in five U.K. respondents said their organization does not have a full-time dedicated anti-bribery and corruption compliance officer.

•A third of the companies do not perform anti-bribery and corruption risk assessments.

"Many multi-national companies seeking to expand their markets or supply chains to certain areas of the world often are met there by an official with their hand out looking for a bribe or some other favor," said Adam Bates, global leader of KPMG's Forensic Services. "Doing the right thing becomes even more difficult when facing increased stakeholder expectations for a better return on investment that requires continued expansion to remain competitive in an increasingly global society."

In addition, while both countries now have stringent anti-bribery and corruption laws - the U.S. Foreign Corrupt Practices Act of 1977 (FCPA) and the U.K. Bribery Act of 2010 - the KPMG survey found that only 43 percent of U.S. executives said their programs comply with the U.K. Bribery Act, while 46 percent of U.K. executives say theirs complies with FCPA. In addition, nearly 80 percent of U.S. respondents said they still had little to no knowledge of the U.K. Bribery Act's provisions, while 32 percent of the U.K. executives said they still didn't understand the U.K. law's requirements.

Finally, only 9 percent of U.K. and 13 percent of U.S. respondents said their organizations allowed facilitating payments; the balance either prohibiting them outright or allowing them to be made only for personal safety concerns.

"Clearly, there is a need for training on both sides of the Atlantic amongst corporate executives responsible for compliance with these wide-reaching laws," said Alex Plavsic, who leads Forensic Services for KPMG's U.K. firm.

The survey was conducted in October and November of 2010 among executives who had anti-bribery and corruption responsibilities in companies with 200 or more employees and more than $300 million in revenue in the United States and £200 million in the United Kingdom and that were subject to regulations such as FCPA or the U.S. Bribery Act.

Source: PR Newswire

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