The CFO Dilemma: Should You Bribe to Survive?

by Cesar Bacani, 13 June 2012

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topics:
Risk Management

tags:
China Criminal Law UK Bribery Act US Foreign Corrupt Practices Act

Nuanced Findings

The Ernst & Young survey report brands the Asia findings “particularly shocking,” noting that 60% of respondents in Indonesia think that making cash payments to win new business is acceptable. “In Vietnam, 36% of respondents consider it acceptable to misstate a company’s financial performance,” the Big Four accounting firm adds.

“It is no coincidence that this is a region where conduct has been heavily scrutinized by US authorities” – and may explain why even the giving of mooncakes is drawing scrutiny from some internal auditors.

Last year, 31 of the 36 enforcement actions launched in accordance with the FCPA involved activities in Asia, Eastern Europe and Latin America. “Many of these prosecutions were related to payments to employees or officials at state-run enterprises,” says the report.

But Chris Fordham, Managing Partner at Ernst & Young and Asia-Pacific Leader of Fraud Investigation & Dispute Services, believes that the findings are more nuanced than the headline numbers suggest. “The CFOs that we work with are invariably committed to extremely high ethical standards,” he says.

Indeed, the proportion of respondents in Asia who say bribery is widespread in their country stands at 36% – lower than the global average of 39%. “That seems to show that there is some success in terms of government regulators’ actions against bribery in the Far East,” says Fordham.

But when asked whether they felt that the risk of corruption had increased, 31% of those in Asia said yes, a proportion that is higher than the global average of 24%.

Fordham says this may be due to the publicity surrounding high-profile anti-corruption cases in Asia. “As corruption is being rooted out, people are seeing more cases reported in the newspapers – that could be the reason why people feel the risk is still increasing,” he speculates.

Is that a Cartier Pen?

Are there cultural issues at work here? “It is often the culture here to make gifts,” says Fordham. “We’re not saying that gifts are wrong, although I do have clients that clearly have a zero tolerance for this type of behaviour.”

But there is a difference between giving someone a ballpoint pen with the company’s logo on it and a Cartier pen. “Often what we’re talking about here in terms of bribery and corruption is what is in the mind of the person making the gift and what is in the mind of the person receiving it,” says Fordham.

“If within those people’s minds there is the idea that making the gift is going to help to influence, then clearly there is an issue; whereas if it is nothing more than a souvenir, then that is different.”

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