Written by Simone Jones on Monday January 6, 2020
Global in its scope, it’s important to recognise that no country or sector is immune from corruption. It remains an issue affecting a diverse range of countries across the world. However, there are factors that can present a higher risk that should be considered.
One of the tools used to understand corruption risk is the Corruptions Perceptions Index (CPI), published on an annual basis by Transparency International, who work globally in leading the fight against corruption. The 2018 CPI, published in early 2019, ranked 180 countries in terms of how corrupt their public services are perceived to be, on a scale of 1 (highly corrupt) to 100 (very clean).
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 of corruption in that country.
Yet the CPI is arguably more important when assessing the risk of a politically exposed person (PEP), a position that by its very nature is 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’, but how often is this remembered? Having a customer or a relationship in a country seen as ‘clean’ doesn’t make it immune from corruption.
Since the inception of the CPI in 1995, Denmark has ranked within the top four ‘least corrupt’ countries, topping the list in 2018 with a score of 88. Denmark is not without controversy, as we know from the ongoing fallout from Danske Bank. In addition, the Organisation for Economic Co-operation and Development (OECD) previously criticised Denmark’s enforcement of the foreign bribery act.
New Zealand’s neighbour Australia ranked 13th with a score of 77, and has struggled to make progress or improvements in recent years. A bribery and corruption survey commissioned by Deloitte back 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% had never conducted a corruption risk assessment.
In joint third place, each with a score of 85, were Finland, Singapore, Sweden and Switzerland. All weathered their fair share of corruption-related storms. For example, in Finland, a report published by the Police University College found that corruption is more common in the private sector than the public.3 Sweden has been marred by the Telia scandal which resulted in the communications firm paying $1 billion in penalties. Singapore and Switzerland have both seen banks linked to the 1MBD scandal.
Whilst reports of corruption may not be as prevalent in these countries, it still exists. These are mainly exampling of private sector corruption, which is out of scope of the CPI. This emphasises that whilst the CPI is a good starting point for assessing and understanding corruption risk, we must not allow ourselves to fall into complacency.
This is in no way a criticism of the good work that countries and organisations do to combat corruption. But efforts must continue: we have to 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 a customer or third party is from, or operates in, a country that is perceived to be a lower risk of corruption. Full and informed risk assessments are vital in order to fully understand the financial crime risk posed by a customer or third party.
This article forms part of the #BigCompConvo - Join us as we explore and debate the latest challenges and issues facing you and regulatory and financial crime compliance professionals all over the world. If you’d like to contribute an article as part of the Big Compliance Conversation get in touch with us at firstname.lastname@example.org
Thank you. Your comment is awaiting moderation and should appear on the site shortly.
Required fields are not completed, please ensure all required fields (*) have been filled in properly.
You can leave the name empty should you wish to remain Anonymous.
Help and support
Alternatively contact us on: +44(0)121 362 7534 / email@example.com (Course information)
or +44(0)121 362 7533 / firstname.lastname@example.org (Enrolled learners)
or +44(0)121 362 7747 / email@example.com (Membership)
or +44(0)121 362 7657 / firstname.lastname@example.org (Assessment)
or +44 (0) 121 362 7503 / email@example.com (End Point Assessment)