With corruption on the rise in Europe the time is right to strengthen your compliance and due diligence process
14 July 2021 00:00
- Risk & Compliance
- Risk Management
- Media Analysis
- Due Diligence
- Sanctions & Watchlists
- Ultimate Beneficial Ownership
- Nexis Diligence™
- PEP Risk
In June, global anti-corruption and bribery (ABC) watchdog Transparency International published a new Global Corruption Barometer for the European Union. With more than 40,000 people interviewed for the survey, the report highlights the public’s concern over growing abuse of power, leading to an increase in corrupt practices. Reports like this have to be taken seriously by businesses because if they or a third party is involved in bribery or corruption, they will face significant legal, financial, strategic, and reputational damage. This report offer substantial insights into the latest ABC and Political Exposed Persons (PEPs) developments in Europe and can support companies to develop a robust compliance and due diligence process .
Corruption looms over Europe
Despite the EU’s longstanding achievements in the areas of human rights, democratic accountability, and the rule of law, recent developments emphasize that this clean image is far from perfect. Regional inequality and widespread public corruption and bribery continue to erode the political stability of the EU. According to the new Global Corruption Barometer, EU citizens are growing increasingly wary of national, regional, and local clandestine activities. These are the key findings of the report:
- Three in 10 EU residents have personally experienced corruption or bribery.
- More than a third of people think corruption has increased in their country in the previous year.
- Almost 80% of individuals believe that corrupt officials are able to avoid appropriate penalties.
- Over half of people suspect their government of being run by private interests.
- Almost a third of people have relied on personal connections to receive medical care, making the healthcare sector a corruption hotspot.
- 64% of EU residents believe they are part of the solution in fighting corruption.
The outcome of the report reflects how the current pandemic has led to an increase in clandestine activities. In particular, healthcare has developed into one of the most vulnerable areas for corruption and bribery. Yet, corrupt practices are not restricted to easier access to public healthcare services, such as vaccine or testing facilities. Recent cases of opaque public procurement processes concerning pandemic-related items, including Personal Protective Equipment (PPE), have highlighted the need for robust ABC compliance and due diligence processes for both public and private companies. A case in point is a recent investigation concerning the Dutch health ministry’s procurement contract for face masks, worth more than €100m, with an enterprise tied to one of the Dutch coalition parties.
Why due diligence matters?
Although there is no silver bullet to tackling ABC related compliance risks, a comprehensive due diligence regime can support companies in identifying and mitigating potential pitfalls that can bear substantial financial, strategic, regulatory, and reputational risks. What reports such as the Global Corruption Barometer highlight is the growing public awareness for ABC-related initiatives. Companies that thoroughly engage with ABC compliance can not only expect a smaller risk of regulatory failure but also gain recognition for their efforts amongst customers and investors.
The Barometer demonstrates that consumers, investors and employees increasingly care about bribery and corruption, and want to buy from, invest in and work for companies that are ethical. This further reinforces the need for a robust compliance and due diligence process to demonstrate an ethical approach and a positive impact on Environmental, Social and Governance (ESG) issues.
A particular challenge originates from the present risk of political corruption and PEPs. Because PEPs hold influential positions, they are assumed to be at greater risk of being involved in acts of money laundering and bribery. Any company dealing and working with PEPs must assess the level of bribery and corruption risk they pose. A strong and comprehensive due diligence process can prevent favouritism in public procurement and ensures a level playing field for all actors engaged.
The bottom line is this: Whether we talk about the use of personal connections when accessing public services, impunity for wrongdoing or an increasing perception of government corruption, EU citizens are more aware of clandestine activities in their countries than ever before. In light of this growing awareness, companies need to strengthen their corporate ABC standards and mitigate potential risks through employing a thorough due diligence process that includes comprehensive PEP lists. This approach will support a company’s resilience against looming ABC compliance risks and reassure regulators and the wider public of their ethical commitments.
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