December 9th is International Anti-Corruption Day. The slogan for this United Nations Campaign is “Break the Corruption Chain,” carrying the message that “corruption is a serious crime that can undermine social and economic development in all societies. No country, region or community is immune.”
We know this to be true. CRI Group’s investigators see fraud and corruption in all parts of the world, affecting businesses and organizations large and small. The reality is that corrupt business practices can cause irreversible financial and reputational harm. And even if a company is a perfect model of ethical practices from top-to-bottom, it can be at risk from unseen dangers lurking in its business associations with third-party partners, vendors or even clients.
With corruption, there is also the concern with the prevailing business “norms” within any country or region in which an organization seeks to conduct operations. While certain types of unethical practices might be illegal and rare in one country, they might be considered a “cost of doing business” in another.
The International Anti-Corruption fact sheet “Fraud and Development” states:
Corruption is the single greatest obstacle to economic and social development around the world. Every year $1 trillion is paid in bribes while an estimated $2.6 trillion are stolen annually through corruption – a sum equivalent to more than 5 per cent of the global GDP. In developing countries, according to the United Nations Development Programme, funds lost to corruption are estimated at 10 times the amount of official development assistance (ODA). But corruption does not just steal money from where it is needed the most; it leads to weak governance, which in turn can fuel organized criminal networks and promote crimes such as human trafficking, arms and migrant smuggling, counterfeiting and the trade in endangered species.
The ongoing threat of corruption is why CRI Group developed its own exclusive strategy to combat it. 3PRM™, or Third-Party Risk Management, provides a proactive approach to mitigating risks from third-party affiliations, protecting an organization from liability, brand damage and harm to business.
The key to 3PRM’s effectiveness lies with our investigators, who use all means necessary to establish the legal compliance, financial viability and integrity levels of existing and potential business partners.
On International Anti-Corruption Day, it is important to remind business owners of the top things they can do right away in order help prevent fraud:
1) Implement a written code of ethics. It is important that anti-fraud policies be spelled out, in black and white, for all employees to know and understand. Just having the code of ethics is not enough – all staff should read and sign the document as an agreement to abide by its standards.
2) Conduct background screening on employees. Thorough background investigations provide a critical layer of fraud prevention. Check employment and credit history, confirm educational background and check references. Apply screening to current employees as well as potential hires.
3) Provide fraud training for employees. Staff should know the basics about fraud: what constitutes unethical behavior? What are the red flags of different types of fraud? Make clear the company’s zero tolerance attitude toward such actions. A strong stance against fraud is only effective if employees know that the company will act in it.
4) Separate duties and responsibilities. For an employee, having control over too many segments of the business can lead to opportunities (and temptation) to commit fraud. Divide bookkeeping and check signing authority, for example, to provide an extra layer of protection.
5) Get help from the experts. Many small to medium-sized businesses don’t have trained anti-fraud professionals on staff. For that reason, it is sometimes important to enlist the help of an anti-fraud firm to conduct a risk assessment, implement anti-fraud controls and investigate when fraud is suspected.
The list doesn’t end there, however. Other elements important to an anti-fraud culture include: management review of all financial information, regular audits, implementation of an anonymous fraud hotline, and regular assessment of how anti-controls are (or aren’t) working. Only by being proactive can we hope to decrease fraud and corruption, and help stem the financial losses that can be so damaging to business.