Five Forces That Will Reshape the Global Landscape of Anti-Bribery and Anti-Corruption
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Five forces that will reshape the global landscape of anti-bribery and anti-corruption Our five predictions for the next five years and beyond www.pwc.com/forensics Corruption remains the single biggest A shared responsibility for making Rising to the challenge issue facing today’s society a difference… Given the profound harm that corruption inflicts on both Bribery and corruption – often defined as abuses of In light of this situation, it’s not surprising that dealing citizens and societies, we believe that tackling it ranks as power by people in positions of authority – are not new. with corruption is an issue that’s continuing to rise up perhaps the biggest single challenge for all of us. Dealing In fact, they’ve been with us ever since humans began the agenda of governments, businesses and civil society. with it demands action that goes way beyond developing to organise into recognisable societies. And they’re Against this background, we examine the themes a compliance programme and including a line item on a certainly still going strong: it’s estimated that more than shaping the global anti-bribery and anti-corruption risk register. US$1 trillion is paid each year in bribes globally, and that landscape over the coming five years and beyond. The US$2.6 trillion is lost to corruption1. That’s 5% of global topography of this future landscape matters to us all. Let us look at how the world can rise to this GDP – and the true figure is probably even higher. challenge. It’s down to all of us to work together to In our view, corporations and their senior leaders make this happen. Against this background it’s not surprising that tackling have the ability – indeed an economic as well as moral corruption is the focus of massive effort and an ever- obligation – to help tackle these issues, by taking steps expanding body of rules and regulations across the to prevent corruption and in confronting corruption world. It’s now 19 years since the OECD launched wherever they see it arising. By doing this, they won’t just its initiative to bring a harmonised approach to the be seen as good corporate citizens, but can make a real battle against corruption, and five years since the UK’s and positive difference to the world as a whole. Bribery Act came into force2. Many other countries have also taken definitive steps forward to start tackling …and rebuilding public trust corruption risk in recent years, including France, South Korea, Brazil, Mexico, China and Argentina. But despite Taking determined action will also do something else: It’s estimated that more than help to close the global trust deficit, to which corruption all of this activity, corruption remains arguably the single biggest issue facing societies worldwide. and inequality are major contributors – a fact highlighted in the World Economic Forum’s Global Risks Report6. US$1trillion is paid each year in bribes globally, and that The importance of addressing it is underlined by the Among populations worldwide, growing disparities in clear correlation between corruption and poverty. wealth are fostering disillusion and anger. And this anger Of the over 7 billion people alive today, over 6 billion now has a voice, through social media and NGOs. US$2.6trillion is lost to corruption. live in countries where corruption is endemic3 – with Transparency International’s latest Corruption At the same time, as our 20th Annual Global CEO Survey7 Perceptions Index4 citing “a vicious circle between confirms, there’s a growing awareness that global corruption, unequal distribution of power in society, corporations are accountable to an expanding array of 1 Source: https://www.oecd.org/cleangovbiz/49693613.pdf 2 and unequal distribution of wealth”. What’s more, stakeholders, including societies and local communities. Source: http://pwc.blogs.com/legal/2016/07/the-bribery-act-5-years-on.html 3 Source: https://www.transparency.org/cpi2015/ 5 global migration and terrorism mean the effects of Back in 2013, 37% of global CEOs worried that lack of 4 Source: http://www.transparency.org/news/feature/corruption_ this cycle are now closer to home than ever before for trust in business would harm their company’s growth. perceptions_index_2016 5 Western countries. This year the figure was 58%. Source: https://www.gov.uk/government/news/anti-corruption-summit- aims-to-secure-global-commitment-against-corruption 6 Source: https://www.weforum.org/reports/the-global-risks-report-2017 7 Source: http://www.pwc.com/gx/en/ceo-agenda/ceosurvey/2017/gx.html Our five predictions for the next five years and beyond 1 Enforcement will continue to evolve and spread geographically As well as reflecting governments’ specific Liaising across borders in this way not only In the world’s biggest economy – the US – 2016 responses, the advancing globalisation of extends enforcement agencies’ reach, but also was a record year for anti-bribery resolutions enforcement also mirrors the megatrends9 makes them more powerful. So it’s increasingly and penalties8 , an upward trend that’s being reshaping economies and societies worldwide in a corporation’s interest to play ball with them mirrored in other jurisdictions globally. We –most notably the ongoing shifts in economic through more open cooperation and strategies believe that anti-corruption enforcement will power, which are helping to foster ever closer such as voluntary self-reporting. For example, Rolls-Royce’sRolls-Royce continue to expand and evolve globally in the international collaboration between enforcement Rolls-Royce obtained a £240m discount on its agreementagreed to pay to pay coming years – and that this well-established agencies. Rolls-Royce’s agreement to pay £671m fine for ‘extraordinary cooperation’12. And the direction of travel will be unaffected by the to settle bribery allegations10 followed close carrot is accompanied by a stick, because if a £671m changing political landscape, including the rise cooperation between the national agencies of company fails to cooperate with the authorities to settle bribery of populism. Brazil, the US and UK. And when engineering then the penalties are potentially severe. The allegations. conglomerate OdebrechtEnforcement agreed to pay a record overall will effect iscontinue to encourage corporations to to evolve and spread geographically FCPA settlement totalling US$3.6 billion11 over be more open, a change which also reflects a Traditionally, Western countries have tended illegal payments made in about 12 countries, growing awareness that eradicating corruption is to lead the way, with – for example – the UK the case was reported to have involved some 13 in everyone’s interests – including governments making growing use of the US-style Deferred agencies around the world. Still more agencies and wider society, as well as agencies and Prosecution Agreements (DPAs) it adopted are now following up related matters, including corporations themselves. in the Bribery Act 2010, and France now allegations of bribery involving senior politicians enacting its own anti-bribery law “Sapin 2”. But (with some former presidents among them) that enforcement of anti-bribery and anti-corruption are developing across Latin America. regulation is now spreading rapidly beyond these jurisdictions, as more territories start to take the problem seriously, and as large economies such as China join the US in extending the reach of their enforcement beyond their own borders. Latin American countries are also increasingly active and making growing use of DPAs. 8 Source: http://www.freshfields.com/uploadedFiles/SiteWide/Campaigns/GI/content/GI%20ABC%20guide%202016.PDF 9 Source: http://www.pwc.co.uk/issues/megatrends.html 10 Source: http://www.telegraph.co.uk/business/2017/01/16/rolls-royce-pay-almost-700m-settle-bribery-corruption-claims/ 11 Source: https://www.law360.com/articles/875299/odebrecht-braskem-to-pay-3-6b-in-record-fcpa-case 12 Source: http://media.investis.com/R/Rolls-Royce/download/2017/press-release/English-external-release.pdf 1 PwC Five forces – Global landscape of anti-bribery and corruption 2 2. Societal action will be more effective than toothless compliance regimes or unen- forced regulation Enforcement will continue to evolve and spread geographically 2 Societal action will be more effective than toothless compliance regimes or unenforced regulation These types of public campaigns bring In many cases, the relatively greater power of Popular anger over inequality and corruption profound implications, and have spread to other societal action also reflects weaknesses in the has been given a voice in recent years by the countries. Experience shows that when it comes political will of a government coupled with non- rise of social media. It’s been further fuelled by to embedding ethical values and changing existent or sporadic enforcement. While laws events ranging from the global furore over the behaviour across an organisation, culture and regulations may have been on the books for Panama Papers and emissions “diesel devices” trumps unenforced rules and regulations. And some time, they’re often only just starting to be Experience shows in cars, to the impeachment of the South Korean the threat of public exposure is more likely2. Societalproperly enforced andaction resourced. So to willplay their bethat morewhen it comes effective than toothless compliance regimes or unen- president on corruption charges13. And most than an enforcement action to push leaders and full part in driving out corruption, laws must to embedding ethical recently we saw thousands of Romanians workforces to embrace cultural change.forced have teethregulation – and be enforced aggressively with values and changing take to the streets to force their government unwavering commitment (financial, political and behaviour across an to back down on plans to water down These impacts are especially clear in industries moral) from governments. organisation, culture 14 anti-corruption laws . that have suffered significant fines for conduct trumps unenforced breaches, such as energy, financial services and rules and regulations.