Quarter of UK businesses asked to pay bribes in 2017

06 April 2018 Authored by Consultancy.uk

UK businesses are reporting an increase in the occurrences of bribery and corruption, according to a new study. However, increased openness and awareness following the introduction of world-leading anti-bribery policies by the UK government means that the one in four firms hit by this kind of fraud often come forward, helping stamp out crime in the future.

In its 2018 Global Economic Crime Survey, professional services firm PwC has noted that incidences of fraud are increasing both in the UK and globally. The report predictably finds that cybercrime is on the rise, as more businesses rely on technology and the use of data. Notably, PwC also reveals that more UK organisations are reportedly experiencing bribery and corruption.

While globally, 45% of monetary losses due to fraud were of less than $100,000, the  report revealed that as many as 3% of instances cost the victims $50 million or more. In the UK, meanwhile, the survey showed a huge increase in the proportion of organisations that reported experiencing bribery or corruption: 23% as opposed to just 6% in 2016. The increase has brought the reported rate of UK bribery and corruption to levels comparable to the Middle East and Latin America. The reported corruption rate is almost twice that of similar developed economies in Western Europe and North America.

Direct monetary losses due to fraud can be substantial

PwC also reports that almost a quarter of UK business had been asked to pay a bribe in the past two years, either domestically or in foreign countries of operation; an increase of nearly 20% over the reported 5% asked to pay a bribe in 2016.

While accurately quantifying the rate of corruption across countries is difficult, organisations like Transparency International believe corruption rates to be relatively low in the UK compared to the rest of the world. So why then are bribery and corruption reports increasing so much? PwC thinks that a new focus on corporate integrity advanced by strict UK anti-bribery policy has boosted openness and awareness, and thus, the number of reports of corruption.

New policies, new results

10 years ago, Britain’s anti-bribery legislation and enforcement was behind that of its peers. A Law Commission Report in 2008 found the UK’s anti-bribery laws to be "…both out-dated and in some instances unfit for purpose.” As a result, the UK Bribery Act was introduced in 2010, which enforced a stricter and clearer framework for combating corruption, and established the UK as a world policy leader in anti-bribery.

The Act applies to both the public and private sector, and requires companies to have procedures in place to prevent corruption, appropriate to the level of risk the business faces. The Act places strict liability on companies for failure to prevent corruption, and the only defence is a set of company procedures to prevent corruption. The company’s anti-bribery policy should include rules about accepting gifts, rules on avoiding conflicts of interest, and guidance on how to conduct corruption-free business.

The reported rate of economic crime is on the rise

The Act applies to both the public and private sector, and requires companies to have procedures in place to prevent corruption, appropriate to the level of risk that the business faces. The Act places strict liability on companies for failure to prevent corruption, and the only defence is a set of company procedures for the same. The company’s anti-bribery policy should include rules about accepting gifts, rules on avoiding conflicts of interest, and guidance on how to conduct corruption-free business.

PwC believes the Act has led to a huge improvement in how UK businesses prevent and detect bribery, although it has led to large increases in the sums of money that firms spend to remain in compliance with the new legislation. Both the OECD and Transparency International have praised the UK government’s policy direction, especially in regard to the Act’s decision to pursue bribery offences by UK firms on foreign soil.

Businesses battling bribery

The new policy-led focus on corporate integrity has heavily encouraged tackling the threat of bribery, lest businesses leave themselves open to liability if employees are found engaging in corrupt practices. 75% of UK respondents said their company has a formal ethics and compliance program, and a further 62% said their company has a specific anti-bribery policy – well above the global average of 50%. PwC posits that government encouragement to self-report and the promotion of whistleblowing hotlines, among other factors have led to organisations being better informed about potential bribery in the UK and abroad.

There is not necessarily more corruption happening in the UK; there are, however, new legislative structures and corporate policies which are better able to identify corruption. There is also likely a stronger awareness of bribery because of corporate training programs and the breaking of historically large bribery cases in the media. Bribery was simply less easily identifiable and less front-of-mind in previous years.

The reported rate of economic crime has increased across all territories

The PwC survey reports that UK respondents are not, however, overly concerned about the threat of bribery to their businesses. Of those who experienced fraud in the past two years, only 5% felt that bribery and corruption has the most disruptive impact on their organisation. PwC proposes that this muted concern could be because extensive compliance frameworks have been instituted, and as a result, future instances of bribery and corruption are believed to be less likely. As well, cyber-crime is a much more threatening prospect currently, and for the foreseeable future; it would certainly be more worrisome to firms than the threat of corruption. As such, only 10% believe bribery and corruption will be the most disruptive economic crime their businesses experience over the next two years.

Although the number of reported occurrences of bribery has increased in the UK, this a likely  result of higher awareness and better corruption-fighting structures rather than an organic increase in British corruption. In any case, UK business respondents do not seem too worried about the matter; the UK seems well equipped to fight this particular type of economic crime.

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