The pressure is on

7 June 2009

08 June 2009

The private sector is worsening in the public's perception of fraud. Martha McKenzie-Minifie looks at the Global Corruption Barometer

If you were stopped in the street and asked which sector of society you thought was most corrupt, what would you say?

"Politics" was the most popular response from the 73,132 people in 69 countries surveyed by Transparency International (TI) between October and February.

Perhaps this is not surprising. In fact, the political world has topped the list of sectors seen to be the most corrupt in the watchdog's Global Corruption Barometer in the past and remains steady at 69 per cent. But more worrying is the increase in those who think the private sector and business world is mired in sleaze.

Results from the 2009 study, released last week, show 53 per cent believed business is "affected" by corruption, up 8 percentage points from five years ago. Meanwhile, perceptions for three other sectors - media, parliament/legislature and judiciary - had either dropped or "not changed notably".

As well as the overall figures, the barometer breaks down perceptions by country.

In the UK (where the sample size was more than 1,000) 27 per cent of respondents think business and the private sector is "most affected" by corruption, second to political parties (named by 30 per cent).

The number of people in the UK who admit to someone in their household having paid a bribe "in any form" in the past year is 3 per cent. This is higher than Switzerland (1 per cent) and Spain (2 per cent), but much lower than Lithuania and Bolivia (both 30 per cent), Russia (31 per cent), Sierra Leone (62 per cent) and Liberia (87 per cent).

Doug Dickson, engagement manager at buyingTeam, says such surveys should be viewed cautiously, but are useful for buyers.

He says procurement professionals should take heed of countries that have received high scores, consider mandating the use of electronic tools and avoid using agents and middlemen in those markets.

Dickson says electronic RFPs and payment systems help purchasing eliminate the potential for fraud and the perception that it occurs.

Alex Plavsic, head of fraud services at KPMG, told SM last week that rising concerns about private sector corruption were "not surprising".

Plavsic says anger over bankers' bonuses as the government steps in to bail out business has fuelled discontent. He says another contributing factor is a "flushing out" of shady practices, as business put in place better policies for prevention and detection of fraud.

"In Europe and the Middle East, where I work, there is a greater effort by companies to put in place measures around bribery and corruption."

TI also points out the trend for greater public concern about perceived private sector corruption is set against the backdrop of the global economic downturn "thrusting the practices of companies in many industries into the spotlight".

SM has documented that, in a global recession, pressure and the opportunity to commit fraud are exploding (Cover story, 16 April).

"There's going to be greater opportunities for fraud now because people need money to keep themselves afloat. Companies are slashing costs, which means they will be cutting the controls as well. The next 12 to 18 months will be pretty ropey," Martin Robinson, education and training consultant at the Fraud Advisory Panel, told SM.

The value of procurement fraud in the UK increased 347 per cent during 2008, according to BDO Stoy Hayward (News, 5 February). It is not alone in having witnessed a rise.

KPMG, PricewaterhouseCoopers, Kroll and the Economic Intelligence Unit are among the organisations to have recorded increases - and they expect the trend to continue.

SMjun2009

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