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6 Red Flags for Workplace Bribery & Corruption

Posted by

Lynne Callister

on 02 Mar 2020

Red Flags for Workplace Bribery & Corruption

Every year trillions of dollars are lost through bribery and corruption. Half of which is perpetrated by employees and contractors. So how can you spot it?

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.

A quarter of UK businesses experienced bribery and corruption in the two years to 2018, a figure that has quadrupled since 2016 according to PwC's Global Economic Crime Survey.

In its Global Fraud and Risk Report 2019/20, Kroll reported that 27% of the perpetrators of bribery and corruption are employees and a further 22% are contractors.

So how can companies prevent bribery and corruption corruption in their business, especially between employees and contractors? First on your list should be spotting the red flags that suggest that bribery or corruption could be taking place...

Free Anti-Bribery Training Presentation

1. Buying unnecessary or inappropriate goods & services

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 be an indication of 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 with 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.

Preventive measures

  • 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

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.

Remedies:

  • Insist on group decision-making for procurement contracts - no single person should have overall control over who is appointed; ensure all decisions are authorised by a senior manager
  • 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

Anti-bribery Good Practice Guide

4. Conflicts of interest

The risk of bribery and corruption can increase where there are close connections or links between, say, 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 to 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.

Preventive measures

  • 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 who 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 - by involving more people in decision-making, you can reduce bias and stereotyping; but watch out for groupthink too

5. Unqualified third parties

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

Preventive measures

  • Conduct due diligence on all suppliers, contractors and consultants before engagement - make sure you know exactly who 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 - eg a reported trip to a supplier's site that simply didn't happen. Sharp practices could be a sign of something bigger - of internal fraud or business money being used for improper payments.

Preventive measures

  • 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.

Free Anti-Bribery E-learning Module

Want to learn more about Bribery & Corruption?

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