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Wednesday
Jul162014

Survey: Despite growing enforcement risks, adoption of compliance programs has stalled

Ernst & Young just issued its 13th Global Fraud Survey. It shows  regulators aggressively pursuing financial fraud and bribery cases, and expressing increasing concern over cyber risks.  

EY highlights how multiple agencies in the U.S. and elsewhere are working together to prosecute both individuals and companies for FCPA offenses, including this year's $384 million resolution by Alcoa with the DOJ and SEC.

And there are more risks for the financial services sector, where some firms and executives face probes for princeling hiring practices.

Yet despite this supercharged enforcement environment, EY said the number of companies with anti-corruption policies increased by only 1% over the past two years.

And a persistent minority has yet to take even the basic steps toward an effective compliance program.

EY surveyed more than 2,700 executives across 59 countries. The results showed that the incidence of fraud and reported levels of corruption aren't declining, and a suprisingly big minority of respondents would pay bribes or make questionable payments.

For example,

  • 6% of respondents -- including C-suite executives -- are willing to justify misstating company financial performance;
  • 29% would be willing to offer entertainment to win/retain business; and
  • 14% would be willing to give personal gifts to win/retain business.

The fix? Back to basics.

Executives and boards need to step up their roles and oversight. They can do this in a number of ways, EY said.

That includes:

  • Board engagement -- appropriately challenging management and requesting regular updates regarding fraud, bribery and corruption risk.
  • Escalation procedures -- companies should have clearly defined escalation procedures, whether to respond to a whistleblower or a cyber incident, to minimize the damage being done.
  • Training -- companies should have tailored anti-corruption training programs and C-suite executives need to lead from the front.

 The Ernst & Young 13th Global Fraud Survey can be found here.
 _______

Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

Julie DiMauro is the executive editor of FCPA Blog and can be reached here.

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