Widespread corruption and bribery can hinder social and economic development by diverting scarce resources away from the most economically productive activity.

It can deter investments and weaken a company’s growth.

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What is corruption and bribery?

Corruption can take many forms, including extortion, fraud, deception, collusion, and money laundering.

Bribery is also a form of corruption, and the most common form of bribery is kickbacks, which involve payment of a commission in exchange for services. Another widespread form of bribery is facilitation payments, where money is paid to speed up or facilitate routine actions.

Companies are being charged with offences

In January 2024, SAP, a provider of enterprise application software and related services, agreed to pay more than $220m to settle bribery charges stemming from investigations by the US Justice Department and the Securities and Exchange Commission (SEC) for violating the Foreign Corrupt Practices Act (FCPA).

SAP paid bribes to officials at state-owned enterprises in South Africa and Indonesia to obtain valuable government business. SAP failed to implement sufficient internal accounting controls over the engagement of, and payments to, third parties and lacked sufficient entity-level controls over its subsidiaries in South Africa, Greater Africa, Indonesia, and Azerbaijan.

In South Africa, SAP supposedly paid millions in fees to consultants, despite no work being done, and also funded trips to New York for government officials, including meals and golf outings.

In Indonesia, it funded shopping excursions and dining, as well as making more explicit payments.

SAP Africa used resellers to conduct business in Malawi, Tanzania, Ghana, and Kenya. These resellers engaged in bid-rigging and arranged corrupt payments to government officials in connection with SAP Africa deals in all four countries between 2014 and 2018.

The bribes were inaccurately recorded as legitimate business expenses in SAP’s books and records.  Earlier, SAP also violated the US laws against bribery and corruption in Panama in 2016.

The company has failed to make and keep accurate books and records and failed to devise and maintain a sufficient system of internal accounting controls necessary to detect and prevent improper payments.

Similarly, 3M, a manufacturer and distributor of industrial products and solutions, has agreed to pay $6.5m to resolve bribery charges against its China-based subsidiary.

The company has violated the books and records and internal controls provisions of the FCPA.

The SEC alleged that as part of marketing and outreach efforts, the employees at 3M’s Chinese subsidiary bribed Chinese government officials by arranging overseas travel, including tourism activities, to encourage them to purchase 3M’s products. The subsidiary conspired with local travel agencies and reportedly paid around $1m to fund at least 24 trips for Chinese government officials, which included tourism activities and shopping visits. This highlights the company’s inadequate internal accounting controls.

Earlier in 2018, the company found that some of its employees had violated the company’s controls and ethics policy, and it reported the matter to the US government and fully cooperated with its investigation. Although the company acted to address this violation, it still needs to work on its internal controls and policies to ensure such instances do not occur in the future.

How to mitigate corruption and bribery

To mitigate corruption and bribery, companies must:

  • Implement a company-wide ban on political contributions.
  • Conduct an external audit of all related party transactions.
  • Implement a company-wide ban on lobbying for unsustainable causes.
  • Anti-money laundering policies throughout the company.
  • Ensure proper segregation of duties.
  • Introduce clear policies to punish tax evasion.
  • Implement employee-friendly whistleblowing policies.