Companies often unwittingly expose themselves to bribery and then do not have the controls, processes, or presence of mind to recognize the risks. This is often due to a mistaken belief that “it wouldn’t happen here.”
While far from exhaustive, the list below provides some examples of how companies expose themselves to bribery.
Perverse Incentives, Including “Own Pocket” Bribery
Bonuses, commissions, and reward structures that are put in place— understandably—to improve performance, but have the consequence of creating the potential for bribery and/ or compliance failure. At its simplest level, if a target and/or the consequences of failure are set high enough, then this may result in an employee resorting to bribery and corruption in order to achieve that target and/or keep their job. Such pressures may also have the consequence of “own pocket” bribery, which are bribes paid from the employee’s own money to achieve the same objectives.
This type of issue can come about because targets are simply not joined up. For example, a goal at a university to achieve donations of $1 million may result in direct or indirect pressure—at both the personal and organizational levels—not to undertake appropriate due diligence.
Perverse incentives are at the heart of a number of recent compliance and mis-selling scandals, including those of the banks Homeserve and Scottish and Southern Energy (SSE) in the UK.
A company might employ a new graduate just starting out in their procurement career in a commodity role, such as procuring batteries. However, while batteries may be deemed a low-value, low-risk item, and, as a consequence, virtually off the radar of senior procurement executives, that simple supply contract may be high value and absolutely crucial to the supplier and other potential suppliers.
As a consequence, those suppliers may well use their most senior employees and be prepared to go to virtually any length to retain, or obtain, the contract. This can result in a significant differential in seniority and resources—hence the scope for differential bribery.
Bank Account Controls
Many issues emerged from the now famous Siemens bribery case, including that there was a huge difference between the number of bank accounts that the company knew it had and the bank accounts that investigators found it actually had in operation. Some of these bank accounts were being used to channel bribery funds. Clearly, this was a key bribery risk.
It is recognized that controlling the opening of bank accounts nationally or internationally can be difficult, and even the latest anti-money laundering (AML) controls only go some of the way to help this, particularly where the operation of a bank account is supported by local employee conspiracy. Moreover, while audits can be directed at the management of bank accounts that a company knows about, it is clearly impossible to audit bank accounts that are unknown, and invisible to centralized audit, finance, and related functions.
There are control “pinch-points” that can be used to identify those accounts that are being actively funded, but, again, it is clearly essential for companies to be aware of the potential bribery risk in the first place.