6 Red Flags for Workplace Bribery & Corruption

Posted by

Lynne Callister

on 02 Feb 2022

Every year trillions of dollars are lost through bribery and corruption. The highest bribery risk firms face comes from third parties. So how can you spot it?

Red Flags for Workplace Bribery & Corruption

The Foreign Corrupt Practices Act and UK Bribery Act 2010 threaten severe penalties. But the UN still estimates that $1 trillion is paid in bribes each year, and a further $2 trillion is lost through corruption.

According to PwC's most recent Global Economic Crime Survey, economic crime in the UK has reached its highest level in the past 24 months. 56% of UK businesses surveyed stated that they were impacted by fraud, corruption or other economic crime. Astonishingly, this 2020 figure is the highest recorded by the survey and is well above the global finding of 47%.

In its Global Fraud and Risk Report 2021/2022, Kroll reported that the biggest threat related to bribery and corruption in the UK comes from a lack of visibility over third parties with a further 27% of the threat stemming from employees' actions.

So how can companies prevent bribery and corruption in their business, especially involving third parties and employees? Top of your list should be spotting the red flags that suggest that bribery or corruption could be taking place...

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1. Unnecessary or inappropriate purchases

Corrupt payments can sometimes be concealed as bona fide expenditure. If an employee purchases unnecessary or inappropriate items from a supplier or contractor with no obvious business need, this could indicate a potentially corrupt relationship.

Watch out for frequent low-level orders or purchases of large quantities, particularly if there is no visible need for such items or those goods never seem to materialise.

Preventive measures

  • Insist on double sign-off of purchase orders and verification checks on goods received.
  • Ensure there is a genuine business need for all purchases over a designated threshold.

2. Questionable invoices

Corrupt payments and bribes may be concealed in invoices. For example, invoices may be submitted without any actual work being done and no supporting documentation, haemorrhaging funds away from the business. Invoices may also conceal corrupt payments, which appear as extra fees, expenses or charges.

Look out for over-inflated invoices or invoices that cannot be matched to any discernible output. Alarm bells should ring if fees, commissions or expenses are listed without supporting documentation. Always look for a pattern of questionable invoices, as this can indicate that the invoices are being used to fund bribe payments.

How to reduce this risk...

  • Conduct due diligence on any suppliers, contractors and consultants before engagement. Ensure they have a proven track record and have the necessary resources/experience required to deliver the goods and services being offered
  • Watch out for over-inflated invoices well above market rates.
  • Ensure adequate oversight and monitoring of all business relationships.
  • Ask questions if you see any unexplained costs or charges before signing off.

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3. Continued acceptance of poorer quality

If an employee continues to work with or accept sub-standard goods or services despite complaints being made, this could be a strong indicator for possible corruption.

You'll need to consider whether they may be getting a kickback from the supplier or contractor for continued business.

How to reduce this risk...

  • Insist on group decision-making for procurement contracts - no single person should have overall control over who is appointed; ensure a senior manager authorises all decisions.
  • Arrange adequate oversight and monitoring of supplier relationships - with regular audits of their performance.
  • Conduct due diligence on all suppliers to ensure they have a proven track record and have the necessary resources/experience required to deliver the goods and services being offered.

4. Conflicts of interest

The risk of bribery and corruption can increase with close connections or links between an employee and a supplier or contractor. At worst, nepotism and cronyism can cloud your judgement and lead to bad decisions which are not in the company's best interests. At best, this can give a perception of corruption.

Think about whether an employee has a personal or economic interest in a particular transaction or appointment. What is their personal relationship with them? Are there close links? Does their behaviour change when certain suppliers are mentioned? Are they acting differently or suspicious? Is there an insistence that they alone deal with a certain supplier? All this could indicate a conflict of interest.

How to reduce this risk...

  • Implement a system for employees to register potential conflicts of interest - be sure to check this before appointments and decisions are made
  • Conduct due diligence on all suppliers, contractors and consultants before engagement - make sure you know exactly whom you are dealing with
  • Only make appointments and procurement decisions based on merit
  • Remove any employee with a close personal relationship or connection to the supplier from the decision-making process
  • Be aware of biases (e.g. halo effect, affinity bias, unconscious bias) and how they may impact decisions. Bias and stereotyping can be reduced by involving more people in decision-making, but watch out for groupthink.

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5. Unqualified third parties

Bribery and corruption can occur via intermediaries and agents, who may appear to do no more than facilitating the deal.

Be suspicious if the third party your company is dealing with seems unqualified for the job they are contracted to perform if they have no track record in the industry in which they operate, if they lack facilities or resources required to perform the work if they come highly recommended by a foreign public official and seem able to bypass legal or bureaucratic hurdles effortlessly.

How to reduce this risk...

  • Conduct due diligence on all suppliers, contractors and consultants before engagement - make sure you know exactly whom you are dealing with.
  • Ask questions if something doesn't add up - wilful blindness is no defence.

6. Incomplete travel and expenses

Finally, bribes and corrupt payments may be concealed as travel expenses or hospitality. Expenses should only be reimbursed for legitimate business expenditure, backed up with supporting documentation.

Look out for travel and expense forms with missing receipts or that don't add up - e.g. a reported trip to a supplier's site that didn't happen. Sharp practices could signify something bigger like internal fraud or business money being used for improper payments.

How to reduce this risk...

  • Ensure that claims for travel and expenses are backed up with necessary documentation and authorised by a local manager first.
  • Implement an expenses policy and threshold - and regularly raise awareness of the rules.
  • Ask questions - particularly for unjustified expenses or repeat costs.

By being aware of the potential signs of bribery and corruption, you can help to protect our company from penalties and safeguard our reputation. Not only will people know the signs to look out for, but the raised awareness could help put people off and prevent corruption from happening in the first place.

Anti-Bribery E-learning Module

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