Andrew Webster from Navigant Consulting is experienced in helping companies manage fraud and crime issues and believes that companies can do far more to prevent corruption. He warns that both national and international legislation is likely to become more vigorously enforced and gives examples.

Imagine, if you will, a scene that has been played in many countries for decades. The deal is nearly done. A businessman sits with the government representatives responsible for making the deal that will make his company a healthy profit. The subject of rewards or commission to those who have influenced the deal's success is then raised.

How does he react? How would you react?

In May 2007, an adviser to the Ugandan government signed a contract worth £210,000 with CBRN Team Ltd to supply training and equipment to the Ugandan army, for the forthcoming Commonwealth Heads of Government meeting held in Uganda in November 2007. Following the agreement, the adviser approached CBRN claiming that he would need to make additional payments to meet a local tax of 10%.  CBRN's Financial Director, Niels Tobiasen, no doubt keen to ensure the deal was sealed, agreed to a total of five ‘local tax' payments worth over £83,000. The payments were made into two bank accounts opened by the adviser in the UK.

Tobiasen, who was charged under section 1 of the Prevention of Corruption Act 1906, later pleaded guilty to five offences under the Proceeds of Crime Act 2002 and received a five-month prison term suspended for one year.

Anti-corruption laws, of which there are many, do not discriminate against public companies any more than private. Indeed the UK's most recent prosecution of Tobiasen highlights not only the generic corruption typologies but the continued susceptibility of business to its illicit charms.

Those whose responsibility it is to manage a company's financial affairs have a very important part to play in the prevention and detection of corruption. The tone set by company principals will be an essential lead to senior managers, employees and those third parties with whom the company interacts in the course of business. In small concerns like CBRN, management appears to have been afforded the influence to override any controls which existed. This highlights the fact that internal audit risk-based programmes have a valid role. However, they need to be enhanced and work in parallel with other preventative measures such as the provision of ethics and compliance hot lines, which can be used by internal 'whistleblowers' and third parties.

Based upon the information these sources provide, specific investigative methodologies can then be targeted at those who continue to conduct business in this way. Detective Superintendent Cowan of the Overseas Anti-Corruption Unit has summarised the position: "Companies themselves are not fraudulent; it is individuals within organisations who are committing the crime. Corruption in the workplace is happening and we need staff members who are witnessing it to come forward and share what they know with us."

Many UK and international companies have robust internal mechanisms which promote anti-corruption behaviour and investigate thoroughly when it arises. However, many could do a lot more to prevent corruption. Companies need to take a critical view of all their operations, particularly any sales or procurement functions. Multinationals who use agents and distributors are particularly vulnerable.

As international business has become truly global, the profile of corruption has been raised to the highest levels. The BAE Systems case has been prominent in the UK most recently and the significance of this case as an indicator of the UK's moral standing cannot be underestimated. The Organization for Economic Cooperation and Development (OECD) recently criticised both the United Kingdom and Japan as failing to implement effective anti-corruption measures.

The impact that the exposure of corruption can have on a company's principals, shareholders and the regulators who monitor their activities, can be catastrophic. The Siemens investigation is costing hundreds of millions of Euros as well as jobs and directors risk potential imprisonment.

Companies that have expanded rapidly in the past few years will have acquired legacy issues which may include corrupt practices. Potential flaws are often missed during the acquisition of subsidiaries as financial due diligence is not complemented by the necessary reputational inquiries. Without a robust ethics and compliance strategy supported by an independent means of investigating and taking the necessary steps to address shortcomings, they are timebombs waiting to explode.

Companies face extraterritorial prosecutions as international authorities actively prosecute offending entities. Since the formation of the OECD in 1961, various international anti-corruption conventions have brought about the enactment of new anti-corruption laws in scores of countries. Recent enforcement led in particular by the United States, includes a wide range of anti-corruption initiatives including the investigation of other nationals and companies who provide services for US companies.

Although the UK has been recently criticised for its lack of enforcement action it is actively involved in international initiatives such as the OECD's Convention against Bribery of Foreign Public Officials in International Business Transactions, which is part of the international effort to stamp out corruption in world trade. All OECD members, which include the top eleven major exporting countries (USA, UK, Germany, France, Japan, Italy, Canada, Korea and Benelux), have legislation in place against bribery of foreign public officials which meets OECD Convention requirements. The UN Convention against Corruption was agreed at the end of 2003 and has been signed and ratified by over 100 countries, including the UK. There are also a number of specific initiatives targeted at industries identified as being particularly exposed to corruption.

A good example of a sector-specific approach is the Extractive Industries Transparency Initiative (EITI). Corruption can be particularly rife in extractives-based developing economies where taxes and royalties paid to public authorities by oil, gas and mining companies are often not reported publicly. EITI is seeking to create greater transparency and accountability through joint action by governments, extractive companies and local and international civil society. The G8 endorsed the Initiative in 2007 and all the major oil and gas and mining companies have announced their support.

The equivalent in the Aerospace and Defence Industries Association of Europe is the Common Industry Standards (CIS). The Medicines Transparency Alliance (MeTA) was launched in London in May 2008 and will look at each stage of the medicines supply chain and seek full disclosure of prices of medicines. There are similar initiatives in the construction industry. Companies should seek to join such initiatives, as sharing of knowledge and good practice is a useful strategic tool used in conjunction with specific control measures, like ethics and compliance hot lines.

The challenges ahead may be significant but the tone from the top on corruption is clearly of 'zero tolerance'. With many different government and non-governmental groups supporting this approach set against the huge penalties for both companies and individuals that fail to meet these demands, corruption is a subject that needs to be addressed now. In summary, future revenues will be far more sustainable if they are achieved through transparent business rather than corrupt practices which have a habit of costing a lot more than any short term revenues.

Andrew Webster is an associate director in the Disputes & Investigations Practice within Navigant Consulting in London. He can be reached at andrew.webster@navigantconsulting.com [1] or Tel: 020 7015 8826