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Corporate fraud and corruption can strike companies of any size, damaging these organisations as well as the broader economy. It is imperative that companies are prepared to tackle financial misconduct no matter what guise it takes. In the coming months and years, as the global economy suffers then recovers from the damage caused by the COVID-19 outbreak, vigilance will be more important than ever. It would be easy for firms to take their eye off the ball as they focus on other matters.

UNITED STATES

Scott Hulsey

Kobre & Kim LLP

“To reduce the incidence of fraud and corruption, corporations rely on compliance programming, ranging from training and controls to internal reporting and investigations. In 2019, US corporations continued to spend significant sums of money in support of compliance – third only behind the UK and Germany. This fact suggests that boards and senior executives continue to understand the implications of failing to quickly and effectively address potential fraud violations. Still, there are signs that US corporations may be letting down their guard, including reports indicating US financial institutions reduced their legal compliance spending in 2019.”

CANADA

Corey Anne Bloom

MNP LLP

“We believe that the threats coming from fraud and corruption are being taken seriously in Canada. However, we expect this attention will be realigned in the coming months due to COVID-19 and resulting economic disruptions. This may lead to weaknesses in the oversight of fraud risk areas and a decreased proactivity against fraud. More critically, even before COVID-19, we noted a certain laxity. According to one of our surveys, most C-suite executives expressed confidence in their ability to prevent fraud, yet half of the respondents suspected that their business has recently experienced fraud. They also felt fraud was worse elsewhere.”

ARGENTINA

Andrés O’Farrell

Marval O’Farrell Mairal

“Since 2016, Argentina has enacted key anti-corruption laws and regulations. These modifications were followed by high-profile corruption investigations, which led to the arrest of prominent politicians and businessmen. Senior executives have undoubtedly reacted to these developments and have since taken important steps toward preventing corruption and fraud. This is especially evidenced by recent changes in internal corporate structures and by the dynamics of the employment market. In this sense, companies are increasingly including a compliance sector within the legal department, or even as a standalone area.”

UNITED KINGDOM

Richard Chalk

Ankura

“Financial penalties and settlements are often key incentives for boards and senior executives to prevent these types of incidents. The recent Airbus settlement acts as a poignant reminder around the potential impact on corporate earnings associated with non-compliance. Organisational culture and tone from the top are key to maximising the effectiveness of preventative measures. Many companies still limit their mitigation techniques to policies and procedures, coupled with improving online training, and fail to go further. It is often only those operating in heavily regulated sectors or connected to the US that proactively enhance their controls.”

FRANCE

Thomas Amico

Linklaters

“Since the enactment of the Sapin II Law in December 2016, corruption and bribery have gradually moved to the top of the corporate agenda in France. Pursuant to the Sapin II Law, companies with at least 50 employees are obliged to set up alert procedures for collecting information disclosed by whistleblowers. Companies with at least 500 employees and a turnover of €100m, or a subsidiary of a French group meeting these thresholds, had to implement various compliance measures against corruption before June 2017, including an audit of the risks, a code of conduct and training programmes.”

GERMANY

Christian Schoop

DLA Piper UK LLP

“Boards and senior executives are increasingly taking actions in order to avoid fraud and corruption within their companies. This is also due to the fact that such measure are required to comply with the corporate law duties of boards and senior executives to avoid risks and damages for the company. Thus, in Germany, most large and many medium-sized companies have implemented comprehensive compliance management systems which reduce incidences of fraud and corruption. These compliance management systems include comprehensive training sessions for employees, various guidelines, such as anti-money laundering (AML) or anti-bribery guidelines, whistleblowing systems or action plans for dealing with suspicious cases.”

PORTUGAL

Tiago Geraldo

Morais Leitão, Galvão Teles, Soares da Silva & Associados

“All boards and senior executives of important Portuguese companies acknowledge that mere suspicions of fraud and corruption pose serious operational and reputational risks. The concrete measures adopted to avoid incidents depend on their sense of the relevant compliance risks, which in turn depend on the industry sector those companies operate in. In regulated sectors, Portuguese boards are increasingly aware and taking proactive steps toward a broad and effective compliance culture.”

INDIA

Ashok Dhingra

Ashok Dhingra Associates

“With the establishment of the Serious Fraud Investigation Office in the Ministry of Corporate Affairs, and a number of other measures, a new emphasis has been placed on corporate governance by companies. Both multinationals and large Indian companies are conscious that they must ensure that they are compliant with the anti-corruption legislation of host countries, as well as the US’s Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act. Crucially, companies are not shying away from investing money and resources and are taking proactive steps to put in place effective and robust internal control systems, whistleblower mechanisms and periodic assessments and evaluations of the effectiveness of such controls.”

HONG KONG

Gwynn Hopkins

Perun Consultants

“Recent challenges across the region have led to a slowdown in economic growth which has created additional problems for multinational corporations (MNCs) operating in the area. In addition, more than 60 percent of organisations in China said they experienced fraud and corruption in the past two years, and senior management have increased spending on combatting fraud and economic crime by using advanced technologies and data analytics tools. In China and Hong Kong, setting up employee reporting systems, expanding existing whistleblower programmes and taking steps to keep senior management in the loop are among the most proactive steps taken by companies.”

AUSTRALIA

Mark Pulvirenti

FTI Consulting

“There is a mixed appetite across Australian corporates for proactive fraud and corruption risk management. While some typically larger, more sophisticated companies proactively work on compliance programmes and devote senior resources to overseeing efforts internally, most could best be described as ‘works in progress’. Few companies address fraud and corruption effectively as an operational risk or take the time to identify and articulate the many fraud and corruption risks in a fraud and corruption risk register. These companies typically have certain anti-fraud and corruption procedures in place, for example they have a code of conduct, may engage in training employees and have a whistleblower hotline.”

UNITED ARAB EMIRATES

Jacqui Record

Ankura

“With the recent regional state initiatives to improve corruption perceptions coupled with high-profile cases such as the Abraaj scandal, there is a heightened awareness of compliance, sanctions, fraud and reputational risk in United Arab Emirates (UAE) companies. Additionally, being a regional hub means most companies in the UAE are impacted, in one way or the other, by international legislation, such as the Foreign Corrupt Practices Act (FCPA) or the UK Bribery Act. All these factors have prompted many companies to scrutinise the weaknesses in their governance and internal control environment and proactively seek to improve them whether internally or by approaching specialised firms.”

CONTRIBUTORS

Ankura

Ashok Dhingra Associates

DLA Piper UK LLP

FTI Consulting

Kobre & Kim LLP

Linklaters

Marval O’Farrell Mairal

MNP LLP

Morais Leitão, Galvão Teles, Soares da Silva & Associados

Perun Consultants