Corruption is a global phenomenon that reaches every corner of the world. It can pose a threat to people, societies, and economic development – with the poorest often most at risk of being exploited.
Corruption undermines trust in institutions, so organizations need to arm themselves with information and strategies that will help them identify suspicious activity and high-risk individuals. With insight, it’s possible to understand risks and make decisions about whom to work with, which plays a role in stopping the spread of this pervasive problem.
Scale of corruption
Bribery and corruption exist within many areas of the legitimate economy, manifesting in different institutions, industries, and individuals. Looking at one specific example of crime associated with bribery and corruption we have human trafficking.
For the month of January 2023, Moody’s Analytics GRID database reported 752 confirmed human trafficking alerts. This is the tip of the iceberg in terms of related crimes, as there will be many incidents of bribery and corruption linked to these 752 events. From drivers accepting payment for transportation to officials being bribed to allow people to cross borders, there is a chain of criminal practice. Uncovering the full scope of these corrupt operations - finding who is in the network, and who is profiting so they can be punished - is complicated.
Corruption is pervasive, but it is also a well-organized operation, and it is big business. The stakes are high and so are the costs to human lives.
- The UN estimates organized crime generates more than $870 billion each year
- The UK government estimates the global illegal drugs trade is worth in excess of £9.4 billion per year
- The International Labor Organization (ILO) estimates some 9 million people are trafficked each year
While governments introduce anti-bribery and corruption (ABC) regulations and organizations have ABC compliance strategies in place, malpractice can take many forms, some of which are highly sophisticated and hard to detect. Detection, however, starts with data and using that data to understand whom you are working with and the risks of doing business with them.
Battling bribery and corruption
The fight against bribery and corruption has got global traction, with countries introducing ABC legislation and establishing agencies to detect and enforce it. Laws include the US Foreign Corrupt Practices Act of 1977, which prohibits payments to foreign government officials for business purposes. There is the UK Bribery Act of 2010 that prohibits both public and commercial bribery, even if made without intent. France introduced Loi Sapin II, a national agency in charge of preventing and detecting corruption. And, in Australia a National Anti-Corruption Agency was recently created to focus on tackling the issue of corruption.
A key reason to focus on bribery and corruption is, as has been discussed, that crimes are not victimless. Illegal transactions, such as giving cash gifts to influence business decisions, even if they appear small, can be tied to larger fraud schemes, money laundering, and terrorist financing actions.
Organizations across the world rigorously enforce anti-bribery and corruption measures, monitoring and vetting, for example, their supply chains, bidding processes, and employee/vendor relationships. These measures are taken to ensure, for example, that bribes aren’t used to secure deals; to achieve ABC compliance; to maintain integrity; and to ensure organizations don’t become embroiled in wider illegal networks.
Customer and supplier due diligence processes are created to check for exposure to risk and also to monitor risk-relevant data, which might change over time. Take, for instance, politically exposed persons (PEPs), they need to be identified within a counterparty network, not because PEPs are criminals, but because they could pose a higher risk of being targeted for bribery due to their position of power and influence. The risk profile of a PEP might be influenced by the jurisdiction they work in, which government department they work for, or how senior an official they are. PEP status can change overnight as elections take place or as someone is appointed to a new role, so these risk profiles need to be alive, with data available in near real-time.
ABC actions
Taking data about PEPs, uncovering sanctioned individuals and entities, reviewing negative news stories, and maintaining visibility of watchlists supports anti-bribery and corruption as part of an active approach to financial crime prevention.
To mitigate against legal, commercial, and reputational risks, including the possibility of criminal liability which can come with prison sentences and unlimited fines, organizations need to take active steps to stop bribery and corruption within their network.
ABC measures, as well as mitigating risk and ensuring compliance with laws, demonstrate good corporate citizenship, which can appeal to ethical customers, employees, and investors.
Six ABC steps organizations can take include –
- Implementing a comprehensive ABC compliance program and reporting framework with commitment from senior and middle management to the strategy
- Establishing a robust system of internal accounting controls and audit
- Conducting risk mapping to evaluate vulnerabilities, for example carrying out third-party risk management or reviewing operations in opaque jurisdictions
- Integrating data checks to detect high-risk individuals such as PEPs or sanctioned entities
- Adopting advanced automated technology to uncover potential fraud, for example in a procurement process
- Performing thorough customer and supplier due diligence to understand risk and make decisions based on corruption-risk exposure
About Moody’s Analytics KYC
Moody’s Analytics KYC is transforming risk and compliance; creating a world where risk is understood so decisions can be made with confidence.
Our customers build their own KYC eco-system using our workflow orchestration platform, award-winning datasets, analytical insights, and integrations with global providers, creating powerful, digital risk management solutions.
Harnessing our innovative technology and industry expertise, Moody’s Analytics automates accurate screening and swift onboarding of individuals, entities, and third-party suppliers. Then supports perpetual monitoring of counterparty risk across a network in near real-time.
Moody’s Analytics KYC is helping customers automate onboarding journeys in 197 countries, across 211 jurisdictions: completing +45 million new customer and third-party checks each day, including screening against our database of 17 million risk profiles, 425 million entities, and +17,000 sanctioned entities.
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