Middle East region sees stronger anti-corruption enforcement, says Ernst & Young

This was a finding from Ernst & Young's 10th Global Fraud Survey: Corruption or compliance - weighing the costs, for which a sample of the largest companies by turnover in the Middle East and around the globe was interviewed.

Respondents included Heads of Internal Audit, Finance, Legal and Risk and other senior managers and board members.

72% of the companies in the Middle East view anti-corruption laws and regulations as being strongly enforced. They have identified training and awareness as a successful measure in minimizing the risk of bribery and corruption and they are also more confident in internal audit successfully detecting fraud or bribery.

Additionally, survey findings revealed that Middle East respondents do not see a whistleblower hotline or communication channel as effective in minimizing the risk of bribery and corruption. Companies in the Middle East are less knowledgeable about the FCPA regulations. They are also less likely to consider bribery or corruption-related risks post-acquisition.

Highlighting the impacts of corruption on a business, Tareq Haddad, Partner and Head of Fraud Investigation & Disputes Services at Ernst & Young in Middle East said:

"Non-Middle-Eastern companies need to consider more robust due diligence measures, particularly when they are active here in the region. They should consider potential regulatory liabilities in their jurisdictions and in the Middle East relative to bribery and corruption. It is not just about avoiding penalties, it is about improving business."

Anti-corruption enforcement has become stronger around the globe over the past five years, according to nearly 70% of respondents to the survey worldwide. Their perceptions are supported by the fact that regulatory authorities and law enforcement are cooperating more frequently. At the same time corruption remains a significant problem for businesses, with more than one-third of survey respondents worldwide saying that corrupt business practices are becoming worse. In this environment, executives and board members from around the globe face daunting challenges around their compliance obligations.

Globally, companies are recognizing the risks of corruption and are doing more to combat it, knowledge of relevant anti-corruption legislation remains patchy, undermining compliance efforts. With 37 countries implementing the OECD Anti-Bribery Convention, understanding the different legal obligations is a challenge. The survey shows that companies are increasingly waking up to the risks that corruption presents. More than half of respondents globally are increasing training on the subject and 45% conduct some form of anti-corruption due diligence before making corporate acquisitions.

Given US authorities' more aggressive and extra-territorial enforcement of the Foreign Corrupt Practices Act (FCPA), all companies, including those operating in the Middle East, need to enhance their understanding of it. The FCPA has become the de facto international standard regarding bribery and corruption, yet only one-third of respondents claimed a good knowledge of it.

About the survey

To create Corruption or compliance - weighing the costs: the 10th global fraud survey, researchers conducted 1186 telephone interviews with senior executives in large organizations, based in 33 countries. The interviews were conducted between November 2007 and February 2008 and the interviewees were senior financial and risk managers, as well as heads of legal, compliance and internal audit teams.

About Ernst & Young's Fraud Investigation & Dispute Services

Dealing with complex issues of fraud, regulatory compliance and business disputes can detract from efforts to achieve your company's potential. Better management of fraud risk and compliance exposure is a critical business priority - no matter the industry sector. With our more than 1,000 fraud investigation and dispute professionals around the world, we assemble the right multidisciplinary and culturally aligned team to work with you and your legal advisors. And we work to give you the benefit of our broad sector experience, our deep subject matter knowledge and the latest insights from our work worldwide.