Bribery, corruption and ethical conduct continue to be important focus areas for organisations of all sizes and are featuring more frequently and as higher priorities on the corporate agenda. It is more important than ever for companies to be doing the right thing, not just to comply with relevant legislation where appropriate, but also to maintain public trust and gain a competitive advantage in an ever more accessible and transparent world.

The wide reach of modern media and the willingness for enforcement agencies to exploit it as an effective deterrent has meant that the public has never been better informed, or more aware of bribery and corruption issues. Bribery, corruption and wider ethical business conduct issues have also become an increasingly prominent political concern in a number of countries, particularly Brazil, Italy, South Korea and China. 

We have summarised below what we view as the key trends relating to anti-bribery and corruption legislation and enforcement action. We explain what these mean for organisations and why bribery and corruption will continue to occupy a top slot on the boardroom agenda for years to come.

1. The introduction of new anti-bribery and corruption legislation

Some level of anti-bribery and corruption legislation is in place in every country in the world. Other than the better known UK Bribery Act and US FCPA, there has been the development of new legislation further strengthening the global legislative landscape. That includes the recent introduction of new laws in Brazil, South Korea, Argentina, Chile and of ‘Sapin II’ in France. More frequently, these include a built-in defence, or a requirement for risk based and proportionate “adequate” procedures, akin to the UK Bribery Act.

Following these developments, it no longer makes sense for a company to wait for an event before reacting, reviewing and enhancing its anti-bribery and corruption policies and procedures. This needs to be performed proactively and on a continuous basis.

2. Increased enforcement of larger fines and penalties being issued

A powerful combination of measures is being applied by regulators and enforcement agencies to monitor and encourage compliance with anti-bribery and corruption legislation. For example, law-enforcement agencies are collaborating more effectively than ever before to secure the prosecution of parties involved in wrongdoing. 2016 saw the Criminal Division of the US DoJ second a prosecutor to the UK for two years, to work at the FCA and the SFO, in order to further the cooperation between the jurisdictions and share knowledge and expertise. In addition, the expanding workforce and budgets of enforcement agencies, particularly in the UK and US, is increasing the capacity of enforcement teams to investigate more cases.

This is being driven by an ethical political mind set, encouraging blockbuster financing in which extra funding for resources is being provided when requested. As such, companies need to consider their global operations and disclosures in multiple jurisdictions. 

The increase in enforcement and collaboration has brought with it larger fines and penalties that are distributed among the various enforcement agencies. Almost all cases in recent years have been accompanied by huge fines and penalties, even when a company has cooperated throughout the investigation process. The amount that a company may be fined for a contravention can be considerable: up to almost USD 1bn as was demonstrated in 2017. While the impact of fines and penalties can impact cashflow, it is the potential financial impact of a company’s tarnished reputation that can really hit a shareholder’s investment.

3. Industry wide sweeps

We have also seen enforcement agencies increasingly keen to use information obtained through a single investigation to perform industry wide sweeps, so as to unearth wrongdoing across a number of companies. Enforcement agencies are developing their understanding of how particular industries work through case knowledge, intelligence development and the sharing of experience, therefore leading to a better understanding of the full picture and the extent of the wrongdoing. For instance, where an enforcement agency knows that a corrupt third party is being used by a number of companies in a particular industry, it may seek to discover the full extent of the third party's involvement and one investigation may spawn into another. Industry wide sweeps stem more and more from the increasing information available through public disclosures and investigative reporting.

Companies should therefore be monitoring global and industry specific media, as well as understanding and assessing their third party risk and keeping up to speed with enforcement actions impacting their business partners and competitors.

4. Individual accountability and criminal liability

A growing trend is to hold managers accountable where they had oversight responsibility that they failed to fulfil competently. Even if the manager or supervisor did not initiate and undertake the wrongdoing, the fact that the manager failed to prevent the misconduct can therefore serve as the basis for sanction.

As with a company, an individual found guilty of a breach of the FCPA or the UK Bribery Act may be issued with a fine, debarred from holding certain levels of office in future – and even receive a prison sentence. In 2017, there were 20 individual FCPA enforcement actions. Many of these individuals are Presidents, CEOs, and COOs who either authorised the corrupt payments in the full knowledge of the intended use of the funds or failed to adequately enquire about the true nature of the transaction before authorising (effectively turning a blind eye).

Consequently, the focus must be on conduct at the top, delivering messages to the organisation on compliance, policing an organisation’s conduct and ensuring there is consistent consequence management.

Authors: Annabel Reoch and Tom Barrett

KPMG LLP have a dedicated anti-bribery and corruption team. If you have any questions or would like to discuss, please contact Annabel Reoch.