Corruption in the Private Sector

Corruption in the Private Sector

In a paper published by the UK Department for International Development, corruption is ranked as one of the top barriers for private business development. As corruption remains a phenomenon that does not have a single definition and is a nuanced issue, we have outlined the main corrupt practices in business to help you recognise them, understand their effects, and combat them in your business.

Top 3 corrupt tactics in business and politics

Trading in influence: where a person in power exerts their position to influence decision-making processes in the private sector, is the most well-known form of corruption. A senior business professional with political connections could gain preferential treatment through influence peddling. Even though the UN advocates for criminalisation of this form of corruption, we are still far from a globally unilateral compliance framework. Trading in influence can occur both in public and private realms; however, it is most detrimental to businesses operating in jurisdictions where the norm is to sidestep standardised business ethics through political connections.

Various conditions contribute to this form of corruption, such as weak institutions, easy access to unregulated offshore entities, established money laundering practices, limited risk of detection and punishment, and complex access to public information. The anti-corruption efforts cannot be separated from the need for state reforms, but business professionals set the norms in the private sector and can require state support.

Beneficial Ownership Secrecy: the controller or owner of a company or a trust fund who differs from the registered legal owner and ultimately benefits from the generated profit. According to the Financial Action Task Force, upon ownership concealment, the proceeds could be used for various purposes, not excluding corruption, money laundering, or terrorist financing. To mitigate financial and reputational risk to your business, a thorough due diligence check focusing on the geopolitical climate and industry to government relationship is recommended. Where public registers are partial, privately accessed, or poorly maintained, there is a red flag to be raised.

Businesses should also be wary of the so-called Revolving Door phenomenon – where a person holding public office takes no “cool-off time” before moving into the same sector of his public duties, this time in private business. Public figures who move into the private sector could maintain and utilise their public realm connections to gain a vantage in the private sector This should be taken into consideration for new board appointments or when entering trade deals with new partners.

How to prepare and protect your business?

The impacts of corruption are detrimental, so it is crucial that businesses do not find themselves engaged in unethical practices due to unawareness.

To make sure your business is prepared, a recent study shows employee training is essential in efforts to minimise the risk of involvement in corrupt practices[1]. Additionally, anti-corruption compliance includes ensuring proper identification and prevention of practices such as facilitation payments which are accounted as small bribery. Bribes could also be masked as the soliciting of any personal rewards, loans, commissions, or excessive hospitality. It is recommended that business owners ensure the setup of a company code of conduct and a system that monitors potential conflicts of interest for its employees.

We, at TenIntelligence, are committed in providing full-scale protection by developing your capabilities for identification and mitigation of corrupt practices. To help your business comply with domestic and international regulations, we focus on:

• Identifying key industries based on their significance to the state economy, the feasibility of addressing corruption in the sector, and use of human source intelligence to draw an analysis.
• Determining the different types of corruption within each sector and the corresponding impact on private sector development for your business abroad.
• Reviewing anti-corruption legislation and analysing state efforts in conducting reforms by implementing enhanced due diligence analysis for your business.

According to Transparency International’s Global Corruption Barometer, business executives constitute 34% of overall corrupt groups in society, where government officials account for 35%. In addition, the National Crime Agency states that the London property and financial markets are favoured destinations to launder and invest the proceeds of international corruption. These findings are critical to the international image of the UK and curb market efficiency by hindering investments and causing reputational damage. Moreover, the growing international efforts to tackle corruption include criminal liability for businesses that have not put all measures to avoid involvement in such practices. As a committed corporate citizen, TenIntelligence is dedicated to ensuring your business stays protected.

[1] Hauser, C. (2019), Journal of Business ethics, Fighting against corruption: does anti-corruption training make any difference?