Most companies have codes of conduct, written policies, and seemingly tight controls. This focus on compliance includes: mandatory compliance training; rules and regulations for customer-facing employees; pre-approval process for discounts, gifts, travel, entertainment expenditures, and charitable contributions; and code of conduct communicated to customers.
Yet, companies have still grappled with corruption dilemmas for years.
This is intensifying now due to:
- Greater exposure to growth opportunities in emerging markets with a history of corruption, and
- Rising backlash against corporate wrongdoing in developed markets (countries strengthening and enforcing their own anti-corruption and anti-bribery laws).
There are some more subtle forms of fraud:
- Bribes: payments to win a business contract, gain regulatory approval, reduce taxes, and avoid customs duties. Prohibit offering anything of value to a government official with the intent to influence that person to secure an improper advantage. Seldom direct payments…more often, extravagant gifts, charitable contributions, foreign travel, etc.
- Speed Money: grease money / small payments to facilitate routine transactions and services so that it is done faster. If not paid, then inordinate delays (clearing shipments, getting permits/licenses, registering land, etc. Basically, cutting through the red tape).
- Employee Fraud: kickbacks from vendors, commissions on real estate transactions or purchases, deposits in overseas bank accounts.
A company must have relentless focus on compliance, commitment from senior leaders towards ethical behavior, and determination to tough it out when these high standards appear to carry a short-term cost (Source: Ravi Venkatesan, McKinsey).
Does your company struggle with fraud and corruption? Would you know if it did?
