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Companies still not monitoring third parties for anti-bribery & corruption risk, KPMG Survey

October 30th, 2015 - Posted by in Anti-Bribery And Corruption

KPMG, the UK's leading provider of professional audit, tax and advisory services recently published the results of a new survey, Anti-Bribery and Corruption: Rising to the challenge in the age of globalization. The survey, produced in association with Singapore Management University, was conducted across 64 countries, receiving 659 responses from persons who considered themselves "one of the most senior persons in charge of day-to-day ABC matters at their companies." Respondents represented companies across a range of industries of varying size and revenue and included listed and unlisted entities subject to local and cross-border ABC regulations.

The survey reveals that, despite tougher enforcement of regulations to combat bribery and corruption, illicit payments to counter-parties continue, with the World Bank estimating that, in 2013, the amount of bribes worldwide totaled $1 trillion.
While many companies are performing due diligence during onboarding third parties, the majority of survey respondents are failing to take the next steps to monitor them and risk breaching regulations. The survey sites the Foreign Bribery Report of the OECD released in 2014 which states that "more than three quarters of the 427 corruption cases analysed involved third parties".

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Key findings from the 659 responses of corporate risk leaders include:

  • Respondents said they are more challenged with the issue of anti-bribery and corruption compared with a survey KPMG conducted four years earlier
  • In the UK, management of third parties and foreign agents is posing the biggest challenge for executing anti-bribery and corruption compliance programs
  • Despite the difficulty of monitoring their business dealings with third parties, more than one third of the respondents do not formally identify high-risk third parties
  • More than half of those respondents with right to audit clauses over third parties have not exercised that right

Enforcing compliance worldwide
Organisations in the UK reported facing challenges with foreign agents, with 48% claiming that they struggle to perform due diligence of foreign assets or third parties. During this phase of globalisation, international organisations must create a compliance strategy that takes into account the growing number and tightened of ABC regulations worldwide. The UK and other European governments have implemented anti-corruption regulations, as have emerging economies including China and Brazil.

Advanced technology to identify potential violations underutilised
Having a compliance program in place isn't enough to keep a company out of the risk zone; only 58% of respondents said their programs include a continuous monitoring and internal audit protocol which is vital in such a challenging regulatory environment. The report states that data and analytics-based solutions can allow for more efficient and cost effective monitoring of ABC compliance – whether it be suspicious activity within the organisation or at a third party. However, only 27 percent of U.S. listed respondents use data and analytics to detect potential ABC violations and just under nine percent continuously monitor this data.

"Regulators are examining whether companies have the means to identify the data, how they are auditing the data and how they are using it to detect potential violations," said Marc Miller, partner and Advisory Risk Consulting Life Sciences leader at KPMG LLP.  "In order to properly analyze data for potential violations, an organization must thoroughly understand what their inherent risks are and how to flag data to identify abnormal activity. The technology exists to execute this analysis, but companies are not taking advantage of it."

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