A new report by Transparency International has found that a third of people in Europe and Central Asia think corruption is one of the biggest problems facing their country. The non-governmental organisation's report, called 'People and Corruption: Europe and Central Asia', surveyed nearly 60,000 people in 42 countries. It found stark differences in the bribery rates of countries across Europe and Central Asia, which demonstrates the need for companies operating internationally to implement a risk-based approach to due diligence.
The key findings of Transparency International's report are:
- 1 in 3 people say corruption is one of the main problems facing their country - 53% think their government is doing a poor job of fighting corruption in the public sector - Nearly 1 in 3 people think their parliament and government officials are mostly or entirely corrupt - 1 in 6 households have paid a bribe to access public services in the past year - Nearly 1 in 3 people don't report corruption because they fear the consequences
In the Netherlands,17% of people think corruption is one of the three biggest problems facing the country. 12% think 'most' or 'all' members of parliament are corrupt. 53% think the government is doing 'badly' at fighting corruption in government. 2% of households to have used basic public services said they had made an unofficial payment or gift when using a service.
Strategic importance of risk-based approach to due diligence
The report reveals clear differences in bribery rates between countries. For example, the UK is rated as having a 0% bribery risk, whereas Tajikistan has a 50% risk. This suggests due diligence should be a priority for any company looking to expand into new markets with a higher risk of bribery. Companies should consider a risk-based due diligence approach, which means identifying the level of risk a third party poses. A low-risk third party might only require minimal screening, while a company operating in a country or sector with a reputation for bribery should receive a high level of scrutiny. This could mean not only screening the company or individual's name against sanctions watch lists, negative news, litigation histories and lists of politically-exposed persons, but also commissioning an in-depth due diligence report.
The Transparency International report also shows that deciding what level of risk each country carries is not straightforward. Companies may be tempted to assume that EU member states have a low bribery rate, but there is large variation within the EU. For example, France has a bribery rate of 2%, whereas Romania's is 29%.
Calls for whistleblower protection
The report also revealed public scepticism about the effectiveness of anti-corruption measures. 27% of respondents said there are no effective actions that people can take to fight corruption. 30% said people do not report incidents of corruption because they are afraid of the consequences. Individual countries had differing views on whether or not it is 'socially acceptable' to report corruption. 74% of respondents in France said it is socially acceptable to report corruption, compared to 10-17% in Russia, Ukraine, Belarus and Croatia. In order to make people feel more comfortable reporting corruption, Transparency International says whistleblower protection and new lobbying rules are important, as well as a 'clear commitment from all levels of government, the private sector and civil society'.
What can your company do?
- Implement a thorough, risk-based approach to due diligence with higher levels of scrutiny on third parties operating in countries or industries with higher risk of bribery and corruption - Stay alert to government sanctions, watch lists and lists of politically-exposed persons to mitigate the risk of conducting business with unethical third parties. - Use in-depth industry and country risk analysis reports to evaluate potential risks of bribery, forced labour, and other areas of financial crime - Review litigation histories and track negative news to improve awareness of a third party's potential to cause reputational damage from bribery and corruption