Corruption and bribery in majority of financial institutions across EMEIA, survey finds

More than half of all financial institutions in Europe, the Middle East, India and Africa (EMEIA) are experiencing widespread corruption or bribery in their business, according to the most recent EMEIA fraud survey by Ernst & Young.

56% of financial services respondents said that bribery or corrupt practices were happening widely in their business. Experts warn that such institutions may be out of touch with their internal controls on such matters.

“There is a point here about whether people are assuming that their own policies and procedures are more effective than they actually are,” says John Smart, London-based partner and UK head of Ernst & Young’s fraud investigation team (pictured). “They’re not testing it effectively and they’re not checking whether or not it is really being applied in practice as opposed to people reporting that it is working well when it isn’t.”

Trevor Barritt, London-based head of compliance for Europe at US security firm Nice Actimize, says this result is also a serious reminder for regulators in the region that there is work to be done on this issue.

“This is clearly a very disturbing finding, which indicates that the regulators have a significant challenge in front of them,” he says. “They must remain vigilant about such issues while also holding the firms themselves accountable to ensure they have the appropriate internal controls and processes in place to prevent such gaming of the system from taking place. It will likely never go away entirely, but improvements can be made. 56% is far beyond an acceptable norm.”

The survey also highlighted an element of denial, according to Smart, who points out that many respondents thought such activity was not going on in their specific organisation. Given that the survey is covering the whole industry, he says this gives rise to important questions.

“A lot of people were saying ‘actually it happens widely in business in my country’, but they seem to be deluded into thinking that it’s not happening in their organisation. It is very worrying that people think everybody else is at it and they are not, as this can’t necessarily be true if you are covering the whole industry.”

The survey also found that 9% of executives in the financial sector knew of customers being sold unnecessary products to meet short-term sales targets. While this may seem like a low figure, Smart says it is a serious cause for concern.

“Most financial organisations should have a process in place whereby if you have concerns about other parts of the organisation, you can report them and they will be properly investigated. 9% doesn’t sound like a lot but actually it’s a big proportion being aware of it.”

He adds that this figure is even less encouraging given that the survey targets relatively senior people in the organisation. “It’s not just the junior people, it’s mainly decision makers, managers, directors and so on. The worry is that this may be something more endemic than simply one or two rogue employees.”

The survey was conducted across 36 countries in the EMEIA region, with 3,000 board members, executives and managers taking part across different industries.


This article was first published on Risk

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