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Do you know where your corruption risks lie?

Written by Simone Jones on Tuesday July 11, 2017

In May 2017 the International Compliance Association hosted Corruption Awareness Week, which included a series of events intended to raise awareness of best practice in anti-corruption. It was apparent throughout the week the clear commitment by both individuals and organisations to combat corruption; a necessity in order to improve economic and social development globally.  

In particular, Transparency International work globally in leading the fight against corruption. One of the ways in which they raise the profile of corruption is through the Corruption Perceptions Index (CPI). The 2016 CPI ranked 176 countries in terms of how corrupt they are perceived to be on a scale of 1 (highly corrupt) to 100 (very clean). 


How do you perceive corruption?

The CPI is often used by financial services firms as a valuable tool to understand and assess geographical risk, particularly when assessing the risk of new customers. Customers originating from countries with a low score on the CPI may typically be classed as posing a higher risk. This is not to say that everyone originating from the country is engaging in corruption, but it recognises the heightened risk that corruption is more prevalent in that country.

The CPI is also used when considering the risk of a Politically Exposed Person (PEP), a position that is already considered to be more vulnerable to corruption. A PEP from a ‘corrupt’ country is in particular considered a higher risk.

Transparency International are clear that ‘no country gets close to a perfect score’ in the CPI 2016, but how often is this remembered? Having a customer in a country seen as ‘clean’ doesn’t make it immune from corruption.


Clean countries?

Since the inception of the CPI in 1995, Denmark has ranked within the top four least corrupt countries. Denmark and New Zealand are joint first place at the top of the CPI, both with a very ‘clean’ score of 90. However the Organisation for Economic Co-operation and Development (OECD) has previously criticized (PDF) Denmark’s enforcement of the foreign bribery act.

New Zealand’s neighbour Australia ranked 13th with a score of 79, however a bribery and corruption survey commissioned by Deloitte in 2015 highlighted that 23% of New Zealand and Australian companies surveyed had ‘experienced one or more known instances of domestic corruption in the last five years’. Shockingly, of the 40% of respondents operating in high risk jurisdictions, 46% have never conducted a corruption risk assessment.

Finland scored 89 in the CPI and ranked third, a report published by the Police University College found that corruption is more common in the private sector than the public. Sweden, ranked fourth on the CPI, has not been without controversy. Telia, a Swedish state controlled group, is facing a reported fine of up to $1.4 billion from US and Danish authorities over corruption in Uzbekistan.

Whilst reports of corruption aren’t prevalent in these countries, it still exists.


Fighting corruption

This article is not intended to be a criticism of the good work that countries and organisations do to combat corruption. The intention is to highlight to people responsible for assessing corruption risk that we must not rest on our laurels. We must ensure that we understand that corruption and bribery can happen within any organisation and that we should remain vigilant of the indicators. We must not allow ourselves to be led into a false sense of security because your customer is from, or operates in, a country that is perceived to be a lower risk of corruption. Full and informed risk assessments are key in order to fully understand the financial crime risk posed by a customer.


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