Overzealous cuts to compliance departments after the financial crisis have left multinational companies exposed to fraud prosecutions, according to data released on Wednesday.
Compared with 2009, twice as many employees of multinationals surveyed by Ernst & Young reported that their company had no anti-fraud measures in place, even as the Bribery Act is due to take effect this summer.
Companies with a UK presence, even if they are based overseas, could face unlimited fines under the act if they fail to prevent bribery.
“Through the financial crisis we advised that corporates should not cut too much muscle in the functions that are responsible for compliance and ethics,” said David Stulb, who leads E&Y’s fraud investigation service. “What this survey sees is that management did go in and cut a little too much.”
A defence against the wide-ranging powers of the act, which comes into force on July 1, is to prove that a company had “adequate procedures” to combat bribery. This includes training employees in anti-corruption. More than a quarter of UK respondents lacked such training, according to the survey.
A third of respondents also stated that corruption was common in UK business, and more than a quarter believed that the financial crisis had exacerbated bribery.
Law and accountancy firms have been quick to warn companies to ensure they have anti-bribery measures in place by July, or face putting themselves at risk.
“There has been some scaremongering, and long-term it’s counter-productive,” said Eoin O’Shea, head of anti-corruption at law firm Lawrence Graham.
“The Bribery Act requires a change in culture but maybe that was a change that was happening anyway. Our society now views the paying of foreign officials as a serious crime whereas 20 years ago you could claim tax deductions from it.”
Of the survey’s respondents in mature European markets, those in the UK were among those most likely to think that offering corporate entertainment was justified to win or keep clients. Corporate hospitality was one area in which Ken Clarke, justice secretary, was forced to clarify the act. “No one is going to try to stop businesses taking clients to Wimbledon, or a Grand Prix,” he wrote in the Financial Times.
Some 13 per cent of UK respondents thought cash bribes were acceptable – below the European average. Greece had the highest percentage, at 44 per cent.
Respondents from countries that suffered badly during the financial crisis – including Greece, Ireland and Portugal – were most likely to say they wanted tougher regulation and harsher penalties for those who committed bribery and fraud.
The survey questioned over 2,000 respondents in 25 European countries who worked for companies with more than 1,000 employees.
Source: http://www.ft.com
Compared with 2009, twice as many employees of multinationals surveyed by Ernst & Young reported that their company had no anti-fraud measures in place, even as the Bribery Act is due to take effect this summer.
Companies with a UK presence, even if they are based overseas, could face unlimited fines under the act if they fail to prevent bribery.
“Through the financial crisis we advised that corporates should not cut too much muscle in the functions that are responsible for compliance and ethics,” said David Stulb, who leads E&Y’s fraud investigation service. “What this survey sees is that management did go in and cut a little too much.”
A defence against the wide-ranging powers of the act, which comes into force on July 1, is to prove that a company had “adequate procedures” to combat bribery. This includes training employees in anti-corruption. More than a quarter of UK respondents lacked such training, according to the survey.
A third of respondents also stated that corruption was common in UK business, and more than a quarter believed that the financial crisis had exacerbated bribery.
Law and accountancy firms have been quick to warn companies to ensure they have anti-bribery measures in place by July, or face putting themselves at risk.
“There has been some scaremongering, and long-term it’s counter-productive,” said Eoin O’Shea, head of anti-corruption at law firm Lawrence Graham.
“The Bribery Act requires a change in culture but maybe that was a change that was happening anyway. Our society now views the paying of foreign officials as a serious crime whereas 20 years ago you could claim tax deductions from it.”
Of the survey’s respondents in mature European markets, those in the UK were among those most likely to think that offering corporate entertainment was justified to win or keep clients. Corporate hospitality was one area in which Ken Clarke, justice secretary, was forced to clarify the act. “No one is going to try to stop businesses taking clients to Wimbledon, or a Grand Prix,” he wrote in the Financial Times.
Some 13 per cent of UK respondents thought cash bribes were acceptable – below the European average. Greece had the highest percentage, at 44 per cent.
Respondents from countries that suffered badly during the financial crisis – including Greece, Ireland and Portugal – were most likely to say they wanted tougher regulation and harsher penalties for those who committed bribery and fraud.
The survey questioned over 2,000 respondents in 25 European countries who worked for companies with more than 1,000 employees.
Source: http://www.ft.com
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