The increase in bribery and corruption and how to assess and manage associated risks

Almost every country in the world prohibits the payment of bribes to their own government officials, but the scale and ubiquity of bribery and corruption continue to worsen.

On 30^th January 2024, Transparency International issued the 2023 Corruption Perception Index (CPI) and an accompanying report. The report applies a score to each country based on collected input from multiple sources. The higher the score, the lower the perceived corruption levels. Denmark continues to achieve the highest score and is therefore ranked as the least corrupt nation, followed by Finland and New Zealand.

However, the CPI illustrates the downward trend in the enforcement of laws and regulations against bribery and corruption. Over the last twelve years, only 28 of the 180 countries measured by the CPI have improved their standing on the index, while 34 countries have significantly worsened. All other countries have remained at the same levels.

Corruption has been increasing over the last twelve years across the globe.[1]  The top 25 countries in the CPI account for only 10% of the global population, so 90% are living under higher and increasing levels of corruption. Two thirds of countries score less than 50% on the CPI.

Western Europe and the EU represent the highest average score of 65, covering 31 countries. This is the first time the average score for this region has dropped in nearly a decade. Several countries have recorded their lowest ever scores including Sweden, the Netherlands, and the UK which has slipped from 11^th position in 2021 to 20^th in 2023. 

The Transparency International CPI report claims that ‘…robust anti-corruption measures continue to be undermined by the weakening of checks and balances. The erosion of political integrity contributes to diminishing public trust…’[2]

The Middle East and North Africa includes 18 countries with a low overall average score of 38. The best scoring countries in the region are the United Arab Emirates, Israel and Qatar. Kuwait has been the biggest improver, while a number of countries have declined significantly. The Transparency International CPI report claims that ‘The loss of momentum in anti-corruption efforts across the MENA region is diminishing public trust.’[3]

Other regions follow the same pattern, which can be read in the full report.

Over the past years, countries have implemented anti-corruption laws and made it clear that they oppose corruption. Despite this there has been a global downward trend in corruption focused enforcement trends since 2018.[4] 

Increasingly, regulators are looking hard at firms’ risk assessments, and failures in these are being highlighted in many of the regulatory enforcement actions of recent years. New legislation is being introduced which will need to be incorporated into firms’ risk assessments. For example, the recently issued US Foreign Extortion Prevention Act broadens the scope and reach of US anti-bribery laws. The UK Economic Crime and Corporate Transparency Act extends corporate liability in relation to financial crime. This sits alongside the existing corporate offence in the UK Bribery Act.

When assessing financial crime risk of any kind, firms are expected to use a variety of sources and to know and understand the limitations of those sources. The CPI is a commonly used measure of bribery risk. However, it is important to understand that the CPI focuses only on public sector bribery and does not cover private sector bribery. To ensure that any bribery and corruption risk assessments are sufficient in scope, other sources may be considered, such as the TRACE Bribery Risk Matrix, which includes assessment of private sector bribery risk.

Bribery and corruption risk is different in type from money laundering or other types of risks, and firms should consider assessing them separately from other risks. However, when considering overall country risk, remember that bribery and corruption are crimes that may themselves create the proceeds of crime and thus become a money laundering risk. Crime is interconnected and the use of bribery and corruption is an endemic part of organised criminal activity.

Regulators such as the UK FCA, and best practice bodies such as the Wolfsberg group, provide extensive guidance to help firms to manage their bribery and corruption risk. Based on these, firms should ensure that they:

• Have in place an appropriate anti-bribery and corruption (ABC) programme, overseen by senior management and administered by an individual with sufficient authority, expertise and resources.
• Carry out and keep up to date, a firm-wide risk assessment relating to the specific risks, requirements and challenges relating to bribery and corruption, in the context of the firm’s business activities. This should consider the wider implications of corruption risk and not just bribery risk. The risk assessment should be reviewed and updated regularly to reflect changes in the business of the firm, it customers, products or services, and the global ABC risk, and any legal and regulatory updates.
• Have in place a written policy or policies that set out the firm’s approach to enforcing ABC laws and regulations. These should include, but are not limited to, clear prohibitions on illegal activities, highlighting areas of risk (in particular areas of higher risk such as dealing with public officials and certain customers), stating a zero-tolerance approach to ABC, identifying the penalties for non-compliance, and highlighting internal procedures for reporting concerns.
• Implement a strong control environment of risk-based controls, including rules relating to gifts and hospitality and due diligence on relevant third parties, and the identification and risk management of associated persons.
• Administer an ongoing programme of training for staff and associated persons.
• Carry out an ongoing monitoring programme to ensure that the control framework is adhered to and to ensure that it continues to be fit for purpose.

‘Corruption is an insidious and often invisible threat, eroding the rule of law, weakening state institutions and hindering economic development by distorting fair competition.’[5]  Corruption and bribery cause immense harm at a national level, weakening trust in democracies and at an individual level can lead to impoverishment, injury and even death.

The same Europol report points out that ‘Corruption is an indispensable instrument for organised crime. It is a key enabler of most criminal operations, yet for some actors it is a prerequisite for their crimes’ success. 60% of the criminal networks operating in the EU use corruptive measures to achieve their illicit objectives.’[6]

When firms consider financial crime risks, it is common practice to refer to Bribery and Corruption risk, but all too often it is only bribery risk that is assessed and not the risks of other aspects of corruption. However, bribery and extortion are often the two sides of a criminal approach. The Europol report on ‘Criminal Networks in EU Ports’ makes the point that bribery is a key factor in criminals subverting others, and violence, including threats, intimidation, and torture are used both to manipulate those who refuse bribes and to enforce compliance by corrupted individuals. Similar dual use of bribery and extortion can be seen in the ‘Ndrangheta’s take over of the Calabrian health service.

With the evident decline in the actions of countries against bribery, and the fall off in the number of successful enforcement actions, legislators and regulators will continue to require firms to focus on achieving a successful identification and management of these risks.

[1] Twelve years ago Transparency International introduced a new assessment methodology, which means that CPI data created under the old methodology is not valid for the purposes of comparison.

[2] Transparency International Corruption Perceptions Index 2023 report.

[3] Ibid

[4] TRACE Global Enforcement Report 2022

[5] Europol: The Other Side of the Coin: European Financial and Economic Threat Assessment 2023

[5] Ibid

Bruce has been working in financial services for nearly 40 years, 25 of these as a learning professional focusing on compliance for a wide range of financial services companies, mainly through the analysis, design, creation and implementation of global training programmes for Tier 1 Banks and FTSE 100 companies. He has been Global Head of Compliance Learning for such firms three times and has provided compliance learning consultancy to similar companies many times. 

Bruce has also provided compliance training and consultancy in other fields such as real estate, industrial supply chains, charities, payment services providers, gambling and casinos and many others.  

A former Director of Training for CISI, Bruce has extensive experience of compliance and financial services-related qualifications and qualified as a Chartered Accountant with Price Waterhouse (as it was then known).

Bruce provides excellent training events on compliance, with a specific focus on financial crime, including all aspects of anti-money laundering, anti-bribery and corruption, fraud and sanctions.