How to strengthen anti-corruption frameworks: 4 actionable insights

Named by the Council of Europe as one of the most recurrent predicate offenses of money laundering, corruption is considered one of the greatest threats to economic development and good governance. For this reason, it was also listed as a key illicit financing threat in the US Treasury’s 2024 National Illicit Finance Strategy. 

But what makes managing corruption risk challenging for financial institutions (FIs)? With inconsistent definitions and diverging regulatory expectations, many firms have been left asking the question: when is corruption, not corruption?

While there is no universal blueprint for fighting corruption, a webinar in ComplyAdvantage’s 2024 State of Compliance series addressed this question, featuring experts from our Regulatory Affairs team, the Royal United Services Institute (RUSI), and law firm Howard Kennedy. This article highlights some of their key takeaways for firms looking to enhance their anti-corruption strategies.

1. Conduct regular risk assessments 

Regular and thorough risk assessments are essential to preemptively address corruption risks in different jurisdictions and across the various operations FIs manage. These assessments should focus on understanding the local regulatory environments and sector-specific risks that could affect firms’ operations.

Each region may present unique corruption risks depending on political instability, weak legal frameworks, or high bureaucratic complexity. For example, some countries may have less stringent anti-corruption laws or enforcement, making them higher risk for firms operating within those jurisdictions.

Risk assessments are the absolute bedrock of any effective financial crime system. How can you know what risks to deal with if you haven’t identified and properly assessed them?

David Hamilton, Partner – Business Crime and Regulatory at Howard Kennedy

By regularly assessing these risks, FIs can better tailor their anti-corruption strategies to address vulnerabilities specific to their business and avoid pitfalls associated with high-risk factors.

2. Adjust strategies based on global corruption trends

While risk assessments help identify vulnerabilities, adapting risk management strategies to reflect the latest global corruption trends is equally crucial. A key longstanding area of concern is the regulation of “gatekeeper professions” – including lawyers, accountants, and real estate agents – who play a vital role in preventing money laundering and corruption by acting as intermediaries in high-risk transactions. While their importance in preventing these illicit activities is not new, the context in which they operate continues to change year on year. The increasing complexity and globalization of financial transactions have expanded opportunities for corruption, making vigilant oversight of these professions more essential than ever. 

In June 2024, the Financial Action Task Force (FATF) highlighted gaps in the application of anti-money laundering (AML) regulations for these professions. The report revealed that while an average of 74 percent of member countries have implemented the FATF’s recommendations, major economies like Australia, the United States, and China scored zero percent. 

Corruption can happen in what you might think are the least likely places… It’s important to be cognizant of the environment that you’re operating in.

Tom Keatinge, Director, Centre for Finance and Security at RUSI

For FIs, these findings highlight the importance of understanding and mitigating corruption risks tied to different regions and professions. To stay ahead, firms should:

• Regularly assess global reports, including those from the FATF, and adjust country risk scores accordingly.
• Provide ongoing AML training for internal teams working with gatekeepers. 
• Conduct third-party due diligence on partners and consultants, especially in high-risk regions.

When is corruption not corruption?

Watch our expert panelists discuss the complexities of defining and managing corruption, focusing on regulatory differences and their impact on compliance and anti-corruption efforts worldwide.

Watch on-demand

3. Screen customers for political exposure and industry risk

In a year marked by 40+ global elections, there is an intense focus on managing risk around politically exposed persons (PEPs). This is predominantly due to the heightened risk of corruption PEPs pose due to their influence, access to public funds, and potential susceptibility to kickbacks and bribery. 

Screening customers for political exposure, both at the onboarding stage and continuously throughout the business relationship, is therefore essential for firms to mitigate the risk of being linked to corrupt activities. This screening helps firms create a more detailed and dynamic understanding of who they’re doing business with, allowing them to assess whether these individuals fall within their established risk appetite.

You should be screening both prospective and existing customers for political exposure… acquiring all of that information at the right time allows you to do more sophisticated monitoring.

Iain Armstrong, Regulatory Affairs Practice Lead at ComplyAdvantage

But PEPs are only one risk factor. Some industries are inherently more prone to corruption than others. For example, in Transparency International’s report on diagnosing the challenges of corruption in the pharmaceutical sector, the organization highlighted various risks presented by the industry, from companies bribing doctors to prescribe their medicines to government employees and introducing substandard medicines into the distribution system. Similarly, extractive industries, such as mining and oil, can introduce significant corruption risks related to granting licenses or concessions. 

Given these heightened risks, firms should ensure industry-specific factors are thoroughly assessed and appropriately weighted to influence their customer’s overall risk score.

4. Embed ABC policies across the entire organization

Due to the speed at which regulations are changing, it is no longer enough for firms to view anti-corruption and consumer protection as merely legal matters to be handled at the top levels of an organization. Historically, legal and compliance teams were tasked with guiding businesses through the complexities of regulatory obligations. However, there has been a significant shift in how firms are expected to manage these risks and this approach is now considered inadequate.

To build a robust anti-corruption framework, responsibility must be spread across the entire organization, from senior management to those who manage customer relations daily.  

Having ownership of anti-bribery and corruption (ABC) measures throughout the business, and not just leaving it to the board or Senior Management, is absolutely fundamental to ensuring you’ve got an effective risk management framework.

David Hamilton, Partner – Business Crime and Regulatory at Howard Kennedy

By ensuring all employees are accountable for upholding the firm’s ABC principles, businesses can better detect and prevent corrupt practices that might otherwise have gone unnoticed at higher levels of oversight.