Combating Corruption And Bribery: What Companies Need To Know #sponsored

Rooting out corruption is more important than ever — and data analytics is a powerful tool in the process.

Make no mistake: the era of global anti-corruption enforcement is here. After building up for roughly the past decade, the worldwide effort to crack down on corruption has reached new heights — and corporations need to take notice.

What has driven this increased focus on rooting out corruption? Greg Naviloff — a director with RSM US LLP, which advises organizations in their anti-corruption efforts — shared his thoughts. “In the U.S., the Foreign Corrupt Practices Act has been on the books for a very long time, but at first it wasn’t strongly enforced,” he said. “But since the Siemens settlement about 10 years ago, everyone has been paying attention.”

The U.S. has been a leader in anti-corruption enforcement, putting forth detailed guidance for companies on how to reduce their involvement in corruption — and the potential civil and criminal liability that comes with it. On an international level, there’s ISO 37001, a management standard to aid organizations in the fight against corruption.

The U.S. is hardly alone in its stepped-up enforcement, as Victor Padilla, also a director with RSM, explained to me.

“Other countries are now in the anti-corruption game,” he said. “France has its Sapin II law, and the U.K. has its Bribery Act. Mexico is aggressively enforcing its longstanding law. Brazil is carrying out Operation Car Wash, a major crackdown on corruption.”

In the face of this increased scrutiny, what can companies do to ensure that they’re not involved in corruption?

“It’s about people, process and technology,” Naviloff told me. “You need people with subject-matter expertise, you need a process to surface what’s necessary to investigate and you need technology — things like structured query language and data visualization tools — to evaluate and deal with the issues.”

And that technology includes data analytics, a powerful weapon in the fight against corruption. But it’s not simple or straightforward, and it requires the right expertise.

“Applying data analytics here can be complicated,” Naviloff said. “It can involve going through multiple complex computer and accounting systems, including the use of back-end extraction, to get data from reports that aren’t formatted consistently. This is a big part of what we do at RSM.”

“For example, we recently helped a U.S. company that had received a whistleblower letter claiming corruption-related issues in Mexico, including potential improper payments,” said Padilla. “Data analytics, applied to a large body of transactions, played a crucial role in revealing the inappropriate payments — bribes to get contracts that were disguised as commissions.”

Naviloff offered another example. The client, a large technology company, wanted to strengthen its proactive compliance program, but could focus on just four or five factors. RSM identified a few areas for heightened scrutiny, including marketing and business development funds, especially arrangements involving expenses split with third parties, and pockets of high profitability, where profits are split with agents, distributors, or other third parties.

“Think about the records available to you — phone records, calendar meetings, email inboxes, files on laptops, accounting records,” Padilla said. “Applying analytics to these different types of data can help you get past just the finances and connect all the dots.”

Not everything that looks fishy turns out to be problematic in the end. Sometimes a company hears of a supposed problem that, upon further investigation, turns out to be gossip or rumor, nothing more. Once again, analytics can help.

“Analytics can be used to separate fact from rumor,” Padilla said. “And when your team has the ability and experience needed for these investigations, these factors combined with analytics, can help you get to the core issues faster.”

Using analytics, companies can review a more comprehensive range of data, including data outside their organizations. This contrasts with traditional, audit-based internal control procedures, which rely largely on traditional sampling methods looking at only a relatively small subset of data.

“An audit-based approach and other traditional approaches, including financial auditing, can be very valuable,” Padilla noted. “No approach will unearth every possible corruption issue, but non-traditional techniques, including using publicly available information and advanced data analytics techniques to enrich your intelligence about certain transactions, can supplement traditional techniques and catch additional issues.”

For example, if investigating a possible Ponzi scheme, seeing the connectivity of individuals using link diagrams can be invaluable. Or take collusion, where traditional financial auditing, such as review of invoices and other payments, might not yield a complete picture.

“Collusion can be hard to prove, especially if the collusion took place through informal conversations over telephone calls,” said Padilla. “So for collusion investigations, we have used data analytics to process metadata about phone calls, to see who is talking to whom and how often. We might not have the content of those calls, but we can look at the metadata for suspicious patterns of communication — for example, an employee colluding with vendors might speak frequently with those vendors after business hours or over weekends.”

But at the end of the day, when it comes to analytics versus audit-based investigating, it’s not an either/or proposition. “Data analytics offers a number of tools not used in traditional auditing,” Padilla explained. “It’s a matter of identifying the best tools and getting the best of both worlds.”

Combating Corruption And Bribery: What Companies Need To Know #sponsored curated from Above the Law