- Financial Statement Fraud: The Costly Game
- Conflict of Interest: The Test of Integrity
- Bribery: The Test of Both Society and Corporate Integrity
- Inventory and Other Non-Cash Assets Fraud: The Real Internal Thief
- Disbursement Fraud: The Ultimate Violation of Trust
- Shimming – When Employees take it Off the Top
To bribe or not to bribe, is a serious question that many companies are confronted with in all competitive industries. The critical issue with regard to bribery is that in most countries it is considered a necessary evil, like prohibition in the United States, only wrong because laws were made to prevent it. Bribery therefore is difficult for compliance professionals to detect and control. It is also a crime that can be found in all industries, at all levels, and is often in senior management.
Definition of Bribery
Bribery is basically defined as an illegal/unethical transaction buying influence over another person. This is a brief but complex definition which has led to a great deal of misunderstanding. At the root of bribery is the intention of one person to influence the decision of another person so as to gain an advantage. In most countries various forms of bribery are illegal, but values in various countries may not consider bribery as unethical. This poses a difficult problem in the global economy that has created many avenues of trans-national crime and corruption, where bribery might be considered a normal means of conducting business.
Furthermore, the issues of greed and temptation collide in bribery situations on both sides of the transaction. The bribe receiver is faced with loyalty to his employer and the temptation of earning more money. On the other side, the person offering the bribe balances morality, and the need to be successful in business thus earning more money. Adding to the complex issue of bribery are the additional crimes that go along with bribery. The money used in the bribe often comes from “Black Account”, bank accounts set up for the purpose of paying bribes because the use of normal company bank accounts could lead to the bribe being detected later. The person receiving the bribe must also conceal the money received. All of this generates the crime of tax evasion as both persons involved in the bribe will not report the money given or received as they are the products of crime. Lastly, the Black Accounts are normally set up in countries that will not require reporting the money or the interest earned to government agencies.
Types of Bribery Schemes
The number of bribery schemes is only limited to the ingenuity of fraudsters, however, the two most common forms of bribery are “Kickbacks” and “Bid-Rigging”.
The Kickback form of bribery involves collusion between dishonest employees and suppliers of goods and services to manipulate the victim company’s procurement process. The briber gives something of value to the employee that has decision making authority over purchasing goods and services as a means of influencing the employee to decide in the briber’s favor. To ensure illegal profit in this scheme, the goods and services sold to the victim company may be sold at a higher price, may be inferior in quality, or not delivered at all. The dishonest employee then receives something of value in exchange, often in a percentage ratio to the fraud, for their decision. Payment to the dishonest employee may include:
- A Promise of a Percent of Ownership in the Briber’s Company
- Free Access to Entertainment (Sporting events, concerts, etc.)
- Employment for the Dishonest Employee or Their Relatives
- Renovation/Construction of Personal Property
- Hotel/Resort Reservations
Kickbacks are directed toward employees in sales and procurement departments of a company or senior management as they have direct influence over acquiring goods and services for the company. The briber will first develop a relationship with a company employee, and once the briber obtains the employee’s trust, the employee will be tempted to accept a kickback.
Case in Point
In September of 2017 ten persons, including executives from Adidas, were arrested by the FBI in the United States on bribery charges. Adidas has been charged for paying bribes to high school basketball players to accept offers to play at Adidas sponsored universities in the United States. The bribes to high school students and their families were as high as $150.000.00
Bid-Rigging is a form of bribery applied in business situations where bids are made to compete for contracts. This type of fraud can take place in commercial businesses that acquire goods and services by formally requesting bids or proposals from suppliers, or by government institutions. The briber targets the areas of a company with authority over the bid process (Clerks, engineers, quality assurance) or the persons who have the authority to award a contract. Normally the briber will focus on 3 phases of the bid process:
- Pre-solicitation Phase: Before bids are officially sought bribes are paid to obtain information before the need is made public or the specification of goods/services is tailored so that they fit the company of the briber.
- Solicitation Phase: Bribes are paid to restrict the number of competitors making bids, submitting bids from fictitious companies, or manipulating the time of bid submission to disqualify other bidders.
- Submission Phase: Bribes paid to compromise sealed bids, control the bid opening, and allow bids to be submitted late, or manipulate the bid log.
Case in Point
In May of 2017, five companies (Siemens, ABB, AEG, Schneider, and Sécheron) plead guilty in Belgium in a case of bid-rigging. The crime stemmed from a solicitation issued by Infratel, the manager of Belgium railway infrastructure. In this scheme the aforementioned companies came to illegal agreements on which company would win the bid on which contract, thus restricting fair trade. The fines totaled 1.7 million Euro.
Detection and Prevention of Bribery
Bribery is a global social issue that has become deeply rooted into private and government institutions to the point that it is considered normal. Many believe that in order to be profitable, one must take part in bribery. Hence, socially it is acceptable to give bribes, and to a lesser extent it is acceptable to accept bribes. Therefore, to prevent and detect bribery the compliance professional must understand the social aspects of this form of crime and focus prevention measures on the social climate of their companies. Secondly, it must be accepted that the primary players in the game of bribery are those employees with direct authority over material acquisition and awarding contracts. This includes senior management.
Forms of Detection Include:
- Purchases Often Made from the Same Supplier
- Established Bidding Policies are not Being Followed
- Cost of Materials Purchased too High
- Restriction of Request for Bids Reduce Competition
- Limiting the Time to Submit Bids
- Revealing Information to Only One Contractor
- Vague Solicitations
- Inadequate Internal Control over the Number and Destination of Bid Packages to Interested Bidders
Forms of Prevention Include:
- A Strict and Enforced Bribery Prevention Policy
- Bribery Awareness Training (Social Engineering)
- Rotation of Duties for Employees Responsible for Acquisition and Contract Awarding
- Review of all Acquisitions and Contract Awards Exceeding a Certain Value by an Independent Review Board
- Internal Bribery Reporting System Place the link to book here please
- Senior Management Support and Enforcement
Senior management must establish a company atmosphere of integrity above all. Compliance and anti-fraud professionals need a two pronged approach to preventing bribery. First, a review system that detects potential bribery situations must be established. Secondly, a Bribery Awareness Program that strengthens employee resistance to offering or taking bribes must be developed.
Bestechung ist ein globales Problem, dass so alt wie die Menschheit selbst ist. Entsprechende Gesetze und Unternehmensregeln versuchen dieses Verhalten einzudämmen, aber verglichen mit der Prohibition in den Vereinigten Staaten: Jeder weiß, dass es illegal ist, dennoch wird es als moralisch nicht verwerflich akzeptiert.
Bestechung ist das Anbieten, Versprechen oder Gewähren von Geschenken oder sonstigen Vorteilen. Dadurch soll eine Entscheidung beeinflusst oder ein Vorteil erreicht werden. Vorteile sind z.B., Eintrittskarten zu einem Sportevent, Konzertkarten, die Anstellung von Familienmitgliedern oder Reparaturen und Baumaßnahmen von privatem Eigentum.
Formen von Bestechung
Die häufigsten Formen von Bestechung sind Angebotsabsprachen und „Kickbacks“ (sog. Schmiergeldzahlungen). Bei einem „Kickback“-Fall arbeitet z.B. ein Mitarbeiter mit einem Zulieferer zusammen. Der Zulieferer zahlt mehr als das Produkt eigentlich wert ist und der Mitarbeiter erhält die Differenz.
Mögliche Gegenmaßnahmen sind:
- Einkäufe bei unterschiedlichen Zulieferern
- Einhalten von Angebotsvorschriften
- Strenge Ausschreibungsprozesse
- Richtlinien zur Bestechungsprävention
Tone from Top und Integrität. Compliance-Verantwortlich müssen sich auf zwei Dinge konzentrieren: ein Kontrollsystem, in dem Bestechungssituationen aufgedeckt werden können, und ein Trainingsprogramm, um Mitarbeiter aufzuklären und mit Wissen zu stärken.
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