Sally Rose
A senior executive from an Australian company operating in several African nations, Indonesia and Papua New Guinea has told Ernst & Young’s managing partner for Oceania in the fraud investigation and dispute services area, Paul Fontanot, that the biggest challenge his company faces in implementing its anti-bribery and corruption policy is enforcing it in their third-party suppliers.
‘The knock-on effect of global anti bribery and corruption reforms on local suppliers in rapidly emerging economies hasn’t really been thought through’ the executive told Fontanot in a confidential interview to discuss the findings of Ernst and Young’s latest biannual global fraud survey.
corruption and bribery
From the 17, 000 respondents globally, 35 companies made senior executives available for a confidential one-on-one interview with a senior Ernst and Young partner to discuss their experience of the issues in the survey. Fifty Australian companies were included in the survey, of those 60 per cent were very large companies with annual revenue greater than $1 billion. It is an anonymous client survey run through a third party on behalf of Ernst and Young.
“The latest survey results portray an increase in business being conducted in a corrupt environment” says Fontanot.
Chief financial officers should be aware that if a company is entering a rapid growth market it has to be prepared to manage the risks of corruption and bribery he says. “CFOs are the gatekeepers to a company’s assets, so inevitably they are involved if a bribe is to be paid or accounted for”.
The first step is to ensure the business has adequate policies or procedures in place to prevent and detect bribery and corruption within the organisation. One hundred per cent of Australian companies surveyed said these were in place and 94 per cent said there were clear penalties in place for breeches. But only 44 per cent reported that any individual had been penalised for breaching the anti bribery and corruption policies.
Source: Ernst and Young
Either, only 44 per cent of companies have had breaches or the good protocols are breaking down at the enforcement level. There is a risk the cause is the later.
Australian respondents showed an increased willingness to pay bribes in the form of entertainment, gifts or cash for the purpose of winning or retaining business.
Source: Ernst and Young
“Companies are under a lot of pressure to meet shareholder expectations and this puts personal pressure on executives to ensure growth” says Fontanot. The results indicate a culture of “almost turning a blind eye”, he says.
In his practice Fontanot sees “payments for such things [as small bribes to win or retain business] earmarked in the general ledger – more so in large multinational rather than smaller companies”.
Fontanot has observed that employees found by their organisations to have paid bribes tend to face “internal disciplinary measures or even be retrenched but it is very rare for the offence to go on file or be handed over to the authorities for a criminal prosecution”.
“There are a lot of questions of who would the company report it to and what would they do about it?” he says.
Today in the Australian Securities and Investment Commission civil penalty action against AWB Liimited, Paul Ingleby, the former chief financial officer of AWB, told the Supreme Court of Victoria that he contravened section 180(1) of the Corporations Act 2001 arising from AWB’s supply of wheat to Iraq under the United Nations (UN) Oil-for-Food Programme (OFFP).
