It’s getting tougher for corporates to monitor third-party bribery and corruption as compliance becomes more complex and operations are increasingly globalized, according to a report from KPMG.

The survey of more than 650 corporate risk leaders found that  more than three-quarters (77%) of U.S. firms said that auditing of third parties for compliance with anti-bribery and corruption (ABC) regulations was highly challenging, compared with 43% percent in KPMG’s 2011 survey.

Similar increases were reported for other issues, such as the difficulty of performing due diligence over foreign third parties, the monitoring and evaluation of compliance, and the variations in different countries’ ABC requirements, the report says.

“A growing number of companies are finding it more difficult to deal with ABC issues, because of their complexity, increasing globalization of their operations, and the need to deal with these matters in many different jurisdictions,” Jimmy Helm, global leader for KPMG Anti-Bribery & Corruption Services, said in a news release.

“There’s a greater understanding of the issues faced, but this doesn’t mean they are easier to deal with,” he added.

A very high proportion of bribes are now paid either by third parties to the ultimate recipient or to seemingly unrelated parties acting on behalf of the ultimate recipient. Indeed, according to the Foreign Bribery Report of the Organization for Economic Cooperation and Development, more than three quarters of 427 corruption cases analyzed involved third parties.

Despite acknowledging the problems in managing third-party risk, more than a third of the KPMG respondents (34%) admitted they do not formally identify high-risk third parties. For those respondents that do have a formal process to identify high-risk third parties, only 56% indicated that they have right-to-audit clauses in their contracts with third parties and only 41% of these respondents have actually exercised such right. Only 69% of all respondents assess third-party risk.

“Companies need to take a risk-based approach to the ABC due diligence of vendors,” said Roy Muller, director of KPMG Forensic in South Africa. “Even where companies indicate that ABC risk is considered, there is often no audit trail or a very poor one to identify high-risk third parties and no clear ranking of them according to the level of risk.”

The survey of companies around the world was conducted by KPMG with the assistance of Singapore Management University. The survey garnered 659 respondents from 64 countries, with 177 U.S.-listed companies represented.

, , , , ,

Leave a Reply

Your email address will not be published. Required fields are marked *