The Middle East, India and Africa regions have showed increasing indications of corruption and fraud as 48 per cent of executives surveyed by global advisory services Ernst & Young said they have experienced some sort of corruption, including being asked to pay bribes to retain or win business or lost business to a competitor that paid a bribe.
However, 76 per cent of global respondents said that the regulatory enforcement in the Middle East has strengthened compared to five years ago, according to Ernst & Young's 10th Global Fraud Survey.
Also 72 per cent of companies in the Middle East considered anti-corruption laws and regulations as being strongly enforced. They have identified training and awareness as a successful measure in minimising the risk of bribery and corruption and they are also more confident in internal audit successfully detecting fraud or bribery.
The survey findings revealed that Middle East respondents do not see a whistleblower hotline or communication channel as effective in minimising the risk of bribery and corruption. Companies in the Middle East are less knowledgeable about the FCPA regulations. They are also less likely to consider bribery or corruption-related risks post-acquisition.
Tareq Haddad, Partner and Head of Fraud Investigation and Disputes Services at Ernst & Young in Middle East, said that the survey showed the need of non-Middle Eastern companies to consider more robust due diligence measures, particularly when they are active in the region. "They should consider potential regulatory liabilities in their jurisdictions and in the Middle East relative to bribery and corruption. It is not just about avoiding penalties, it is about improving business."
The Far East region led global areas in corrupt practices with an average of 56 per cent of executives saying that they had experienced some sort of corruption. Japan, surprisingly, topped the list of corrupt executives, with 72 per cent of executives revealing that they experienced bribery or corruption.
Ernst & Young's survey "Corruption or compliance – weighing the costs" was conducted on around 1,200 respondents from the largest companies by turnover around the globe, including heads of internal audit, finance, legal and risk and other senior managers and board members.
Around 70 per cent of the respondents said that anti-corruption enforcement had become stronger around the globe over the past five years. At the same time, corruption remained a significant problem for businesses, with more than one third of respondents saying that corrupt business practices are becoming worse. Respondents from the mining and utilities sectors considered bribery as the most critical challenge.
The survey showed that 25 per cent of respondents said their companies had experienced bribery or corruption during the last two years, while 23 per cent said that they knew someone in their companies who paid a bribe to retain or win business, while 18 per cent said that their companies lost business for a competitor who paid a bribe.
However, the survey showed companies had developed a clear appreciation for the risks of corrupt payments, as the majority expressed their confidence in their approach to corruption risks in the context of mergers and acquisitions. Two thirds of the respondents said the management knew which controls failed or were absent when corrupt payments took place.