UK Bribery Act 'Will Lead to Increased Investment in Anti-Corruption'

A quarter of construction companies were victims of economic crimes such as asset misappropriation, accounting fraud and bribery, according to research.

PricewaterhouseCoopers (PwC) surveyed 226 construction firms in 43 countries and found that sophisticated crimes are on the increase.

Nearly half of respondents whose organisations had experienced economic crime in the past year reported bribery and corruption. In addition, 29 percent of those surveyed said a belief that competitors were paying bribes in order to win contracts was a reason for the practise occurring.

PwC has also found that companies are concerned about a series of emerging regulatory risks, as the approach to the prevention of bribery and corruption changes from the top down.

Upping the Ante

Inter-governmental organisations such as the Organisation for Economic Co-operation and Development, the United Nations and the World Bank, plus national legislators and law enforcement are upping the ante when it comes to anti-corruption and stamping out bribery, according to PwC.

There will be more coordinated action and stiffer punishments in the future, including hefty financial penalties and exclusion from bidding for future government contracts.

The UK has recently passed the new Bribery Act in an attempt to strengthen anti-corruption practises in the country. This brings with it a new crime for failing to prevent bribery.

Will Kenyon, partner at PricewaterhouseCoopers and an anti-corruption specialist, commented: "With regard to bribery, many companies are realising that what has been considered 'standard practice' now represents an untenable corporate risk and that they need to be seen to be cleaning up their acts."

"We expect to see a significant investment in anti-bribery programmes and controls in response to the new Bribery Act. These will include more training and awareness raising, due diligence on business partners, an intensification of compliance and control activities and more targeted monitoring and internal audit."

Anti-corruption Strategies

The findings from the PwC's study of construction companies are indicative of a wider problem. The oil and gas sector also has a bribery issue, increasing the need for firms to invest in anti-corruption.

Companies like BP and Tullow Oil have told the Financial Times that they welcome the new anti-corruption laws, identifying that their business principles already clearly outlawed bribery.

Centrica told the newspaper that the introduction of the legislation was a chance to remind staff of their anti-corruption principles, particularly employees working in bribery hotspots.

The company's policies include a requirement for employees to declare and keep a record of hospitality or gifts accepted or offered, which are then subject to managerial review.

BP enhanced its anti-corruption compliance programme last year, conducting risk assessments and training programmes in several key countries. It also prepared an anti-corruption toolkit of materials for businesses to use so that they can continually improve their programmes.

As part of stepping up its efforts, BP's legal team for anti-corruption and trade sanctions trained over 137 selected employees in BP's anti-corruption policies and procedures during 2009. In addition to this face-to-face training, 7,363 employees also completed online anti-corruption and bribery training modules.

Whistleblowing

Seeking out whistleblowers is an important part of anti-corruption strategies, as a study published in the Journal of Finance has indicated.

Alexander Dyck, professor of finance at the University of Toronto, Adair Morse, assistant professor of finance at the University of Chicago, and Luigi Zingales, professor of entrepreneurship and finance at the University of Chicago, studied all reported fraud cases in large United States companies between 1996 and 2004 to identify the most effective mechanisms for detecting corporate fraud.

These included high-profile cases such as Enron and the study found that fraud detection relies on "a wide range of often improbable actors".

"No single one of them accounts for more than 20 percent of the cases detected," they reported.

The professors also indicated that incentives for the existing network of whistleblowers were weak and that these needed to be raised for anti-corruption strategies to succeed.

"Auditors, analysts, and employees do not seem to gain much and, in the cases of employees, seem to lose outright from whistle blowing," they commented.

"A natural implication of our findings is that the role of monetary incentives should be expanded. We find that the use of monetary rewards provides positive incentives for whistle blowing," they concluded.