survey report-dow-jones-metric stream-anti-corruption

D O W J O N E S &

M E T R I C S T R E A M

G L O B A L A N T I - C O R R U P T I O N

S U R V E Y R E S U L T S 2 0 1 6

1

ContentsExecutive Summary

Survey Highlights

Anti-Corruption Programs

Due Diligence

Respondent Profiles

Appendix

3

4

5

13

16

19

3

6

R E G U L A T I O N S I M P A C T I N G

A N T I - C O R R U P T I O N P R O G R A M S

( P A G E 1 7 )

R I S K R A N K I N G ( P A G E 1 2 )

F A C T O R S L I M I T I N G

D U E D I L I G E N C E

( P A G E 2 8 )

F A C T O R S T R I G G E R I N G

R E V I E W O F B U S I N E S S

P A R T N E R ( P A G E 1 5 )

Cost

Time required to perform due diligence

Staff research expertise

Access to commercial services and

linguistic expertise

89%report government sanctions

as the most likely trigger to review business relationships

76%cite potential

negative media coverage

75%reputation issues

56%increased enforcement of FCPA

55%local/country- specific regulations

53%UK Bribery Act

Transparency International’s index continues to be the most used information source for risk-ranking countries, followed by internally compiled risk data.

OF RESPONDENTS CURRENTLY RISK-RANK COUNTRIES, A 10% INCREASE FROM 2015

83%

3

Executive Summary

Dow Jones Risk and Compliance, in conjunction with MetricStream, surveyed 330 respondents around the world to understand companies’ usage of anti-corruption programs and its impact on business decisions as well as due diligence in practice.

Respondents of the survey are compliance staffers in companies with anti-corruption programs, based in the following regions:

91 in North America

65 in Western Europe

108 in Asia-Pacific

66 in Other countries (11 in Central/South America, 29 in Eastern Europe, 26 in Africa/Middle East)

The survey found that having anti-corruption programs in place for six to 10-plus years continues to trend upward, nearly reaching 60%. Most of the programs in place have codes of conduct and internal training.

On regulations noted to have major impact on company anti-corruption policies, the UK Bribery Act increases 19% to 53% in 2016 to join FCPA, local regulations and FATCA.

Concerns about violating anti-corruption regulations continue to impact decisions about working with business partners, entering/expanding in emerging markets and working in particular locations. Iran, China, Russia, Iraq and Ukraine continue to be the countries mentioned most often as disrupting business endeavors.

We invite you to delve into the Annual Survey to find out the latest insights on anti-corruption program and due diligence. We hope your compliance program benefits from the practices and opinions within this survey in 2016 and beyond. If you’d like to learn more, get in touch with our team at [email protected]

T H E D O W J O N E S R I S K A N D C O M P L I A N C E T E A M

4

Survey Highlights

M O N I T O R I N G B U S I N E S S P A R T N E R S

27% report that their companies monitor business partners at least quarterly. The proportions that never monitor or use some other approach (i.e. risk-based) increase in 2016. Government sanctions increase 12% from 2015, where 89% of respondents note it as the most likely trigger to relationship reviews.

C O U N T R Y R I S K R A N K I N G

83% of respondents currently risk-rank countries, a 10% increase from 2015. Transparency International’s index continues to be the most used information source for risk-ranking countries, followed by internally compiled risk data.

R E G U L A T I O N S I M P A C T I N G P O L I C I E S A N D D E C I S I O N S

The UK Bribery Act increases 19% from 2015 as the regulation most likely to have major impact on company anti-corruption policies, followed by FCPA, local regulations and FATCA.

Concerns about violating anti-corruption regulations continue to impact decisions about working with business partners, entering/expanding in emerging markets and working in particular locations.

F A C T O R S I M P A C T I N G B U S I N E S S D E C I S I O N S

Calling off business endeavors due to difficulties getting information to assess corruption risk decrease by 10% in 2016, returning to comparable levels in 2014, which is around 50%. Iran, China, Russia, Iraq and Ukraine continue to be the coun-tries mentioned most often as disrupting business endeavors.

The proportion of respondents reporting that their companies ever lost business to unethical competitors continues to trend downward, from 33% in 2014 to 26% in 2016.

P O S I T I V E A S P E C T S O F A N T I - C O R R U P T I O N R E G U L A T I O N S

The most important benefit of anti-corruption regulation continues to be positive company reputation and image, as well as reinforcement of the compliance message internally. Cost savings, improved business relationship with partners and more fairness in the market place are also mentioned by at least 50% of respondents.

Notes:

Base for reporting is companies with anti-corruption programs in place

2016 total results are compared to 2014 and 2015 to measure trends; statistically significant differences between 2015 and 2016 are noted with arrows

B A N N I N G F A C I L I T A T I O N P AY M E N T S

More than 30% of respondents feel that it is realistic to ban facilitation payments entirely while more than 25% feel it is not realistic to ban payments. 13% report that they have changed facilitation payments policies in the past year and 41% have already banned it.

R E A S O N S F O R L A C K O F C O N F I D E N C E I N D U E D I L I G E N C E

60% of respondents note that difficulty evaluating information credibility is the main factor hindering confidence in due diligence. Difficulty accessing information and insufficient staff are other frequently mentioned barriers.

F A C T O R S L I M I T I N G D U E D I L I G E N C E

Cost, time required to perform due diligence, staff research expertise, access to commercial services and linguistic expertise are all factors limiting due diligence.

D U E D I L I G E N C E U P D A T E S A N D R E S E A R C H

30% report that they undertake annual due diligence updates. An internal central compliance team handles due diligence in most respondents’ companies. They perform preliminary due diligence research, with company ownership being the most frequently researched topic, followed by financial performance, negative news and company reputation.

5

E X I S T E N C E O F A N T I - C O R R U P T I O N P R O G R A M S

The proportion of respondents representing companies with anti-corruption programs in place exceeds 90% in 2016, continuing in an upward trend since 2014. The most common reason for a lack of programs continues to be the perception that other programs and/or policies already cover anti-corruption issues.

Anti-Corruption Programs

2014 2015 2016

Already covered by other programs/policies 47% 50% 52%

Company is too small 24% 23% 22%

Only operate domestically 28% 20% 15%

Believe we don’t have exposure 19% 13% 11%

Program would be too costly 10% 10% 7%

Other reasons 16% 20% 18%

T I M E A N T I - C O R R U P T I O N P R O G R A M S H A V E B E E N I N P L A C E

The proportion of respondents from companies whose anti-corruption programs have been in place for six-10 years or longer continue to trend upward, nearly reaching 60%.

R E A S O N S W H Y D O N ’ T H AV E A N T I - C O R R U P T I O N P R O G R A M( A M O N G T H O S E W I T H O U T A N T I - C O R R U P T I O N P R O G R A M S )

A N T I - C O R R U P T I O N P R O G R A M I N P L A C E

82% 90% 92%

0%

20%

40%

60%

80%

100%

Anti-Corruption Program in Place

2014 2015 20166% 5%

23% 11% 11%

38%

28% 27%

16%

18% 25%

17%

38% 34%

0%

20%

40%

↑60%

80%

100%

Over 10 years

6-10 years

3-5 years

1-2 years

Less than a year

6 years or longer 33% 56% 59%

2014 2015 2016

Over 10 years

6-10 years

3-5 years

1-2 years

Less than a year

6

A N T I - C O R R U P T I O N P R O G R A M C O M P O N E N T S C U R R E N T LY I N P L A C E

As in previous years, nearly all respondents represent companies whose anti-corruption programs include internal codes of conduct and internal training. The proportion of programs that include due diligence of existing business partners or automated monitoring of all partners decline in 2016.

S Y S T E M S C U R R E N T LY L E V E R A G E D I N A N T I - C O R R U P T I O N C O M P L I A N C E

The proportion of respondents representing companies using GRC systems in anti- corruption compliance efforts decreases, reversing a sharp increase in 2015. Reported usage of HR and ERM systems also decreases.

T E C H N O L O G Y U S E D T O M A N A G E A N T I - C O R R U P T I O N P R O G R A M S

More than 70% of respondents report their companies use sanctions and watch list services in their anti-corruption programs. Overall, 95% have some type of technology in place to manage anti-corruption programs.

2014 2015 2016

Internal code of conduct 95% 95% 97%

Internal training 92% 95% 94%

Due diligence on new partners 77% 91% 86%

Auditing compliance activities 85% 90% 86%

Ethical/compliance standards 74% 86% 85%

Alerting to risks 73% 83% 82%

Due diligence on existing partners 59% 83% 79% ↓

Risk ranking of partners 53% 72% 70%

Employee internal transaction monitoring 59%

Automated monitoring of all partners 36% 69% 58% ↓

Business partner training 35% 58% 58%

2014 2015 2016

Government Risk & Compliance (GRC) systems 35% 60% 48% ↓

Customer Relationship Management (CRM) systems 33% 55% 48%

Expense systems 47% 52% 48%

Human Resources systems 35% 47% 39% ↓

Supplier Relationship Management (SRM) systems 27% 42% 36%

Enterprise Resource Management (ERM) systems 27% 42% 32% ↓

2016

Sactions and watch list services 72%

Office productivity software 43%

Knowledge management software 36%

In-house developed software 32%

AC compliance on GRC software platform 27%

Specialized/dedicated AC compliance software 26%

Other 7%

None 5% 95% have technology in place

7

F R E Q U E N C Y O F M O N I T O R I N G B U S I N E S S P A R T N E R S

More than 25% of respondents claim their companies monitor business partners quarterly or more often. The proportions that “never” monitor or use some other approach (i.e. risk-based) increases in 2016.

F A C T O R S T R I G G E R I N G R E V I E W O F B U S I N E S S P A R T N E R S

Government sanctions increase in 2016 to become the event most likely to trigger relationship reviews. Potential negative media coverage, reputation issues and discovery of regulatory issues are also mentioned by at least 70% of respondents.

19% 7% 12%

23%

16%

24%

42%

44%

36%

6%

8% 5%

4%

6% 7%

8% 3%

11% 12%

0%

20%

40%

60%

80%

100%

Daily

Weekly

Monthly

Quarterly

Annually

Other

Never

At least quarterly 16% 33% 27%

2014 2015 2016

↓

↓

↑

↑

“Other” mentions (2015):

• Depends on partner risk• As needed/ad hoc• Event/trigger/alert-based• Every 2 years or longer

2014 2015 2016

Goverment sanctions 79% 77% 89% ↑

Potential negative media coverage 76% 77% 76%

Reputation issues 81% 76% 75%

Discovery of involvement in regulatory issues 75% 70% 73%

Changes in company ownership 67% 65% 66%

Financial stability/performance 70% 58% 62%

Discovery of government connections 44% 55% 50%

Managment/leadership changes 50% 55% 48%

8

C O U N T R Y R I S K R A N K I N G

The proportion of respondents from companies that risk-rank countries increases to more than 80%. Transparency International’s index continues to be the most used infor-mation source for risk-ranking countries, followed by internally compiled risk data.

R E G U L A T I O N S W I T H M A J O R I M P A C T O N C O M P A N Y P O L I C I E S & P R O C E D U R E S

Mentions of the Bribery Act increase in 2016 to join FCPA, local regulations and FATCA as the regulations most likely to have major impact on company anti-corruption policies. Mentions of local regulations having major impact decrease in 2016.

72% 73% 83%

0%

20%

40%

60%

80%

100%

Currently Risk-Rank Countries

2014 2015 2016

C U R R E N T LY R I S K- R A N K C O U N T R I E S

I N F O R M AT I O N S O U R C E S U S E D T O R I S K- R A N K C O U N T R I E S( A M O N G C O M PA N I E S T H AT R I S K R A N K C O U N T R I E S )

2014 2015 2016

Increased enforcement of FCPA 49% 54% 56%

Local/other regulations 49% 64% 55% ↓

Bribery Act 2010 (UK)* 52% 34% 53% ↑

Foreign Account Tax Compliance Act (FATCA) 32% 47% 48%

Dodd-Frank Act (US) 26% 33% 35%

Use of Travel Act to prosecute domestic corruption (US) 21% 16%

Clean Companies Act (Brazil) 12% 13%

VimpelCom bribery fine 10%

*Removed “First prosecutions of…” from question wording

“Local/other” regulations (2016):

• Country or jurisdiction regulations• AML & anti-bribery regulations• Local anti-corruption laws

72%

56%

33%

10%

67%

61%

40%

8%

75%

49%

30%

9%

Transparency International CPI

Country risk data compiled internally

Subscription to country risk data

Other

Information Sources Used To Risk-Rank Countries (among companies that risk-rank countries)

2016

2015

2014

2016

2015

2014

9

I M P A C T O F C O N C E R N A B O U T V I O L A T I N G R E G U L A T I O N S

Concerns about violating anti-corruption regulations continue to impact decisions about working with business partners as well as (to a lesser extent) entering/expanding in emerging markets and working in particular locations.

R E A S O N S F O R D E L AY I N G O R C A L L I N G O F F B U S I N E S S E N D E A V O R S

The proportion of respondents indicating that their companies called off business endeavors due to difficulties getting information to assess corruption risk decreases in 2016, reversing a 2015 increase. The incidence of delaying or calling off endeavors due to unclear anti-corruption regulations remains near 50%.

38% 42% 37%

29% 26% 28%

Delayed/Stopped Working with a Business Partner

Delayed

Stopped

67% 68% 65%

16% 23% 18%

37% 31%

33%

Delayed/Stopped Entering Emerging Markets

16% 24% 19%

39% 29% 29%

Delayed/Stopped Expanding in Emerging Markets

26% 32% 28%

27% 25%

25%

Delayed/Stopped Working in a Particular Location

53% 54% 51% 55% 53% 48% 53% 57% 53%

2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016

38% 42% 37%

29% 26% 28%


Delayed

Stopped

67% 68% 65%

16% 23% 18%

37% 31%

33%


16% 24% 19%

39% 29% 29%


26% 32% 28%

27% 25%

25%


53% 54% 51% 55% 53% 48% 53% 57% 53%

2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016

38% 42% 37%

29% 26% 28%


Delayed

Stopped

67% 68% 65%

16% 23% 18%

37% 31%

33%


16% 24% 19%

39% 29% 29%


26% 32% 28%

27% 25%

25%


53% 54% 51% 55% 53% 48% 53% 57% 53%

2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016

38% 42% 37%

29% 26% 28%


Delayed

Stopped

67% 68% 65%

16% 23% 18%

37% 31%

33%


16% 24% 19%

39% 29% 29%


26% 32% 28%

27% 25%

25%


53% 54% 51% 55% 53% 48% 53% 57% 53%

2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016

29% 39% 35%

25%

24%

18%

Could Not Get Information To Assess Corruption Risk

Delayed

Called off

29% 32% 30%

18% 22%

19%

Questioned Legality Because Anti-Corruption Regulations Were

Unclear

54% 63% 53%

2014 2015 2016 2014 2015 2016

↓

47% 54% 49%

29% 39% 35%

25%

24%

18%

Could Not Get Information To Assess Corruption Risk

Delayed

Called off

29% 32% 30%

18% 22%

19%

Questioned Legality Because Anti-Corruption Regulations Were

Unclear

54% 63% 53%

2014 2015 2016 2014 2015 2016

↓

47% 54% 49%

D E L AY E D / S T O P P E D W O R K I N G W I T H A B U S I N E S S P A R T N E R

C O U L D N O T G E T I N F O R M AT I O N T O A S S E S S C O R R U P T I O N R I S K

D E L AY E D / S T O P P E D E X P A N D I N G I N E M E R G I N G M A R K E T S

Q U E S T I O N E D L E G A L I T Y B E C A U S E A N T I - C O R R U P T I O N R E G U L AT I O N S W E R E U N C L E A R

D E L AY E D / S T O P P E D E N T E R I N G E M E R G I N G M A R K E T S

D E L AY E D / S T O P P E D W O R K I N GI N A P A R T I C U L A R L O C AT I O N

Delayed Stopped Delayed Called off

10

T O P C O U N T R I E S A F F E C T E D B Y C O N C E R N S

Iran, China, Russia, Iraq and Ukraine continue to be the countries mentioned most often as disrupting business endeavors due to concerns about legality, information quality or potentially violating anti-corruption regulations.

B U S I N E S S L O S T T O U N E T H I C A L C O M P E T I T O R S

The proportion of respondents reporting that their companies ever lost business to unethical competitors continues to trend downward. Among companies losing business, nearly 70% of respondents cite non-compliant competitors and more than 60% mention losses to companies not required to comply with anti-bribery regulations.

COUNTRY

Legality or information quality concerns

Anti-corruption regulation compliance concerns

2014 2015 2016 2014 2015 2016

Iran 15% 15% 20% 13% 19% 22%

China 16% 19% 17% 14% 17% 21%

Russia 20% 22% 17% 16% 26% 20%

Iraq 9% 15% 16% 7% 19% 17%

Ukraine 8% 13% 15% 5% 16% 11%

North Korea 6% 11% 11% 6% 13% 12%

India 15% 10% 10% 15% 12% 12%

Nigeria 10% 8% 10% 11% 13% 10%

Sudan 8% 8% 10% 7% 11% 9%

Afghanistan 7% 10% 9% 6% 12% 12%

Pakistan 4% 11% 9% 5% 13% 10%

Libya 5% 8% 9% 9% 10% 9%

Egypt 7% 7% 8%

Brazil 8% 10% 8% 5% 15% 9%

Indonesia 9% 8% 8% 9% 10% 9%

Vietnam 8% 9% 9%

Top 16 for 2016 in each category

33%

28% 26%

0%

20%

40%

Lost Business To Unethical Competitor

2014 2015 2016

2014 2015 2016

Were covered by anti-bribery regulations but failed to comply 68% 68% 68%

Were not required to comply with anti-bribery regulations 59% 72% 62%

L O S T B U S I N E S S T O U N E T H I C A L C O M P E T I T O R S

U N E T H I C A L / N O N - C O M P L I A N T C O M P E T I T O R S( A M O N G C O M PA N I E S L O S I N G B U S I N E S S )

11

R E P O R T I N G B R I B E R Y T O A U T H O R I T I E S

The proportion of respondents who feel bribery should always be reported to authori-ties decreases in 2016, reversing a 2015 gain. Less than 25% of respondents report their companies have reported suspected bribery (either alone or with other companies), a decrease from 2015.

P O S I T I V E A S P E C T S O F A N T I - C O R R U P T I O N R E G U L A T I O N

The most important benefits of anti-corruption regulation continue to be positive impact on company reputation and reinforcement of the compliance message internally. Cost savings, improved relationships and a “more level playing field” also are mentioned by at least 50% of respondents.

66% 77%

64%

29% 18%

31%

Bribery Should Be Reported

Sometimes

Yes

95% 95% 95%

2014 2015 2016

↑

↓

19% 15%

12% 7%

Company Has Reported Bribery

Yes, with other

companies

Yes, on our own

20162016

B R I B E R Y S H O U L D B E R E P O R T E D

C O M P A N Y H A S R E P O R T E D B R I B E R Y

Sometimes Yes

Yes, with other companies Yes, on our own

2014 2015 2016

Helps company reputation/image 81% 86% 84%

Reinforces the compliance message internally 78% 76% 76%

Money saved (reduction in fraud/corruption) 54% 59% 57%

Improved relationships with business partners due to increased scrutiny

48% 57% 55%

More level playing field (more fairness) 59% 51% 53%

Improved operational efficiency 38% 48% 45%

12

I S I T R E A L I S T I C T O B A N F A C I L I T A T I O N P AY M E N T S ?

More than 30% of respondents feel it is realistic to ban facilitation payments entirely while more than 25% feel it is not realistic to ban payments. Although respondents feel an outright ban will help stem global corruption, the main obstacles to a ban are reliance on payments by government officials, differing cultural expectations regarding facilitation payments and requirements to participate in payments to do business in some countries.

C H A N G I N G C O M P A N Y P O L I C Y R E G A R D I N G F A C I L I T A T I O N P AY M E N T S

Nearly 15% of respondents report their companies have changed facilitation payments policies in the past year or plan to do so in the next year. Another 40% claim payments are already banned in their companies.

35% 24% 27%

37% 47% 41%

28% 29% 32%

Yes

Not sure

No

2014 2015 2016

50% 47%

39% 40%

11% 13%

Changed policy in past year

Yes, have

changed policy

No, payments

already banned

No, no change

in policy

49% 46%

39% 41%

12% 13%

Considering changing policy in next year

Yes, plan to

change policy

No, payments

already banned

No, no change

in policy

2015 20152016 2016

50% 47%

39% 40%

11% 13%

Changed policy in past year

Yes, have

changed policy

No, payments

already banned

No, no change

in policy

49% 46%

39% 41%

12% 13%

Considering changing policy in next year

Yes, plan to

change policy

No, payments

already banned

No, no change

in policy

2015 20152016 2016

Yes

Not sure

No

Yes, have changed policy Yes, plan to change policy

No, payments already banned No, payments already banned

No, no change in policy No, no change in policy

R E A S O N S W H Y I S R E A L I S T I C T O B A N F A C I L I TAT I O N P AY M E N T S ( 2 0 1 6 ) :

“It sets the tone that bribes, no matter what the size, are not tolerated and permits the company to take action as needed.”

“UK Bribery Act and the Canadian ABAC legislation bans it completely and we are following suit.”

“As long as national laws and corporate practices create exceptions for ‘small’ bribes, it encourages the continuation of higher-level rapacity.”

“Facilitation payments are nothing else but a direct bribe.”

“An outright ban would cause governments to change their internal policies and pay structures in a way that discourages corruption.”

R E A S O N S W H Y I S N O T R E A L I S T I C T O B A N F A C I L I TAT I O N P AY M E N T S ( 2 0 1 6 ) :

“You can’t change the culture of business in other countries.”

“There are many locations where health and safety can be imperiled by failing to pay low level functionaries to perform their duties.”

“The law should allow for facilitation payments, as long as they are logged and accounted for as such.”

“It is a mechanism that facilitates business relationships. Same as paying commission to a real estate agent.”

“In certain countries, facilitation payments are part of the local business practices and considered to be legitimate.”

“The people of some countries do not make sufficient funds to care for their families. These people will ask for a bribe.”

C H A N G E D P O L I C Y I N P A S T Y E A R C O N S I D E R I N G C H A N G I N G P O L I C Y I N N E X T Y E A R

13

C O M M E N T S A B O U T C U R R E N T R E G U L A T O R Y E N V I R O N M E N T

Compliance professionals acknowledge the increasing importance and benefits of anti-corruption compliance, but express concerns about inconsistent enforcement, misplaced enforcement priorities and negative impacts on trade relationships and the cost of doing business globally.

C O N F I D E N C E I N D U E D I L I G E N C E I N F O R M A T I O N & P R O C E S S

Although the proportion who are “extremely” confident decreases in 2016, more than 60% of respondents remain confident in their companies’ due diligence information and processes.

R E A S O N S W H Y N O T F U L LY C O N F I D E N T I N D U E D I L I G E N C E P R O C E S S

Difficulty evaluating information credibility increases in 2016 to again become the main factor hindering confidence in due diligence. Difficulty accessing information and insufficient staff are other frequently mentioned barriers.

“The current environment is not business-friendly. There is not enough credit given to companies who are trying to do the right thing. It’s a game of ‘gotcha’ with the government.”

“It is very difficult to function in an environment where some industries or sectors are making efforts to adhere to anti-corruption standards, while other sectors remain outside of the focus of the regulators.”

“Most of the screening programs used for detecting anti-corruption activities rely on media reporting where accuracy and authenticity of information can be subject to interpretations.”

“Resources available do not (always match) the expectations of regulators. (Costly) process infringes regular business activity.”

“(Anti-corruption) is becoming more and more important and has governments’ support.”

“There needs to be greater enforcement on the (third) party. Enforcement targets the manufacturer and not enough attention is focused on the (third) party that facilitates the bribe.”

“All applicable statutory provisions should be STRICTLY enforced!”

“Many of the compliance guidelines purport to be practical, but are actually check-the-box exercises. Additionally, the DOJ and SEC are using the regulations to confiscate cash, as opposed to shoring up shaky business practices.”

“There needs to be a recognition at the business and law school levels that compliance needs to be taught there, so that the next wave of business professionals will expect it, not question why we have it.”

“Anti-corruption regulations hurt American business interests abroad and create enemies in friendly but corrupt countries.“

Selection of comments representing themes in verbatim comments. Not in ascending or descending order by frequency.

Due Diligence

4% 4% 6%

45% 27%

31%

46%

57% 57%

5% 12% 6%

Extremely confident

Very confident

Somewhat confident

Not confident

Extremely/very confident 51% 69% 63%

2014 2015 2016

Extremely confident

Very confident

Somewhat confident

Not confident

2014 2015 2016

Difficulty evaluating credibility of information 59% 44% 61% ↑

Difficulty accessing information 51% 41% 42%

Insufficient staff to gather information 42% 36% 39%

Uncertainty about where to get relevant information 37% 38% 31%

Time pressure 34% 30% 31%

Budget/cost constraints 39% 28% 24%

Language barriers 20% 21% 17%

Other reasons 5% 5% 9%

14

F A C T O R S L I M I T I N G D U E D I L I G E N C E

Cost, time, staff research expertise, access to commercial services and linguistic exper-tise are all factors limiting due diligence. “Other limiting factors” include poor information quality, lack of internal resources (including top management support) and inconsistent local regulations.

T A R G E T S R E Q U I R I N G D U E D I L I G E N C E

More than 65% of respondents claim that M&A targets “always” require due diligence, followed by senior level executives, sales agents and customers/clients.

F R E Q U E N C Y O F D U E D I L I G E N C E U P D A T I N G

Nearly 35% of respondents report their companies conduct annual due diligence updates; a similar proportion bases the frequency of updates on target risk levels.

R E S E A R C H T Y P I C A L LY C O N D U C T E D I N P R E L I M I N A R Y D U E D I L I G E N C E

Research on company ownership, financial performance, negative news and reputation continue to be the types of preliminary due diligence conducted most often.

2014 2015 2016

Cost 21% 21% 23%

Time it takes perform due diligence 26% 19% 21%

Staff research abilities/expertise 19% 18% 17%

Access to commercial information services 18% 19% 17%

Linguistic expertise 13% 15% 13%

2014 2015 2016

M&A targets 70% 63% 66%

Senior level executives/board members 52% 57% 60%

Sales agents 47% 60% 59%

Customers/clients 43% 63% 58%

Third-party agents or consultants 43% 62% 56%

Suppliers 28% 51% 50%

2014 2015 2016

Company ownership 85% 81% 86%

Financial stability/performance 79% 73% 79%

Media search for negative news 76% 76% 76%

Reputation 79% 71% 70%

Senior executives 71% 63% 64%

Government connections 59% 65% 62%

Involvement in regulatory issues 58% 64% 59%

Use of third parties 44% 43% 42%

% M E N T I O N I N G E A C H A S E X T R E M E LY/ V E R Y L I M I T I N G

% M E N T I O N I N G E A C H A S A L W AY S R E Q U I R I N G D U E D I L I G E N C E

Other Limiting Factors (2016):

• Poor information quality and accuracy

• Lack of staff/time/expertise/resources

• Lack of executive support

• Inconsistent local rules and norms

• None—not limited in due diligence efforts

Examples of themes in verbatim comments.

4% 4% 6%

35% 36%

37%

15% 9%

10%

6%

4% 5%

9%

9% 7%

28% 38% 34%

Annually

Every two years

Every three years

Event-driven

Varies by target risk

Other

Never

2014 2015 2016

Annually

Every 2 years

Varies by target risk

Every 3 years

Other

Event-driven

Never

15

H O W D U E D I L I G E N C E I S C O N D U C T E D

Internal central compliance teams continue to handle due diligence in most respondents’ companies. Mentions of partial outsourcing increase to reverse a 2015 decline.

P A R T I A L O U T S O U R C I N G O F D U E D I L I G E N C E

Among companies that partially outsource due diligence, the average proportion outsourced continues to remain near 35% of the work. Due diligence for specific geographic regions remains the single strongest driver of partial outsourcing.

2014 2015 2016

Central compliance team 70% 74% 73%

Regional compliance teams 30% 40% 36%

Partially outsourced 27% 14% 27% ↑

Completely outsourced 5% 5% 6%

Other 10% 6% 11%

2014 2015 2016

Specific countries or world regions 54% 50% 51%

Components requiring fast turnaround 33% 44% 37%

Overflow/capacity restrictions 22% 28% 27%

Specific languages 28% 39% 26% ↓

Specific industries 20% 47% 22% ↓

Net: Outsourced

2014: 32%

2015: 17%

2016: 31% ↑

Multiple responses allowed

P E R C E N TA G E O F D U E D I L I G E N C E O U T S O U R C E D

D U E D I L I G E N C E C O M P O N E N T S P A R T I A L LY O U T S O U R C E D

24% 17%

27%

26% 30%

26%

22% 20%

19%

18% 27% 17%

10% 7% 12%

Percentage of Due Diligence Outsourced

75% or more

50% to 74%

25% to 49%

10% to 24%

Less than 10%

Average 34% 36% 33%

2014 2015 2016

75% or more

50% to 74%

Less than 10%

25% to 49%

10% to 24%

16

R E G I O N & C O M P A N Y S I Z E

Regional representation remains steady in 2016, while the proportion of respondents from medium-sized companies increases.

J O B R O L E S & T I T L E S

Compliance Officers remain the plurality of respondents. Representation of some job titles shifts to more closely resemble the 2014 respondent pool. Nearly 25% of respondents work in compliance operations and a greater proportion are in decision-making roles in 2016.

R E G I O N

C O M P A N Y S I Z E

21% 24% 28%

38% 21% 20%

31%

31% 33%

10% 24% 20%

Region

Other

AsiaPac

W. Europe

N. America

Small = 1-500 employees Medium = 501-10,000 employees Large = More than 10,000 employees

23% 17%

27% 36%

50% 47%

Company Size

Large

Medium

Small

“Other” includes Eastern Europe, Central/South America, Africa and Middle East

2014 2015 2016 2015 2016

↑

21% 24% 28%

38% 21% 20%

31%

31% 33%

10% 24% 20%

Region

Other

AsiaPac

W. Europe

N. America

Small = 1-500 employees Medium = 501-10,000 employees Large = More than 10,000 employees

23% 17%

27% 36%

50% 47%

Company Size

Large

Medium

Small

“Other” includes Eastern Europe, Central/South America, Africa and Middle East

2014 2015 2016 2015 2016

↑Small (1-500 employees)

Medium (501-10,000 employees)

Large (10,000 employees)

*Other

Asia Pacific

Western Europe

North America

Respondent Profiles

*“Other” includes Eastern Europe, Central/South America, Africa and Middle East

JOB TITLE 2014 2015 2016

Compliance Officer/Manager 45% 38% 47% ↑

General/Internal Counsel 15% 6% 11% ↑

Operations Manager 9%

Risk Management 19% 7% 5%

Analyst/Consultant/Research 3% 17% 3% ↓

Internal Audit/Auditor/Accountant 3% 8% 3% ↓

Ethics Officer 2% 1% 3%

Other 12% 17% 19%

JOB ROLE

Compliance operations 22% 23%

Regulatory and policy compliance 11% 15%

Legal 14%

AML/BSA 14% 11%

Finance 6%

Know Your Customer (KYC) 10% 6%

Accounting risk and control 10% 4% ↓

Governance 4% 3%

Client screening 5% 2%

Fraud 3% 2%

Other 18% 14%

DECISION-MAKING ROLE

Sole decision maker 4% 6%

One of decision makers 22% 33% ↑

Influence decisions 31% 30%

Not involved in decisions 44% 30% ↓

Other job titles (2016):

• Relationship Manager• Business Development• AML Officer• Administrator• Several other titles

Other job roles (2016):

• Relationship management

• Multiple listed roles• Several other roles

17

I N D U S T R Y

Nearly 60% of 2016 respondents represent banking/finance companies, an increase from 2015. Non-finance representation is spread across several industries, with far fewer consulting respondents compared to 2015.

C H A N G E S I N P E R S O N A L W O R K L O A D

More than half of respondents report increased personal workloads in the past 12 months. Greater senior management focus, increased areas of responsibility and rising regulatory expectations continue to be the strongest drivers of increasing personal workloads.

INDUSTRY 2015 2016

Commercial Banking 11% 19% ↑

Retail Banking 8% 13%

Insurance 10% 8%

Investment Banking 4% 6%

Private Banking/Wealth Management 4% 5%

Other Finance 11% 7%

Finance 48% 58% ↑

Manufacturing 8% 9%

Energy 4% 6%

Healthcare 2% 5%

IT/Telecoms 2% 4%

Multinational/holding company 3%

Retail 2% 3%

Consulting 17% 2% ↓

Other Non-Finance 17% 7% ↓

Non-Finance 52% 42% ↓

C H A N G E I N P E R S O N A L W O R K L O A D I N P A S T 1 2 M O N T H S

R E A S O N S F O R I N C R E A S E I N P E R S O N A L W O R K L O A D [ A M O N G T H O S E R E P O R T I N G I N C R E A S E D W O R K L O A D S ]

3% 5%

42% 39%

55% 56%

Change in Personal Workload in Past 12 Months

Increased

Stayed the

same

Decreased

2015 2016

Increased

Stayed the same

Decreased

2015 2016 MAIN REASON (2016)

Increased AC focus by senior management 62% 57% 22%

Increased areas of responsibility 64% 54% ↓ 15%

Rising regulatory expectations 54% 52% 17%

Growth of company 39% 36% 12%

New/expanded government regulations 43% 34% ↓ 9%

Expanding into new markets 30% 24% 5%

Out-dated technology/processes 23% 18% 2%

Suspicious activities 23% 18% 6%

Formal feedback by regulators 18% 16% 2%

18

C H A N G E S I N D E P A R T M E N T W O R K L O A D & G L O B A L A C P E R S O N N E L

More than half of respondents predict increases in department workloads in the coming year. However, fewer report additional hiring of AC personnel in the past 12 months in their organizations.

P L A N S F O R A C - R E L A T E D T E C H N O L O G Y S P E N D I N G

Nearly 40% of respondents predict increases in their companies’ anti-corruption-related technology spending in the near future. Almost 60% feel their companies will take some action toward evaluating and/or acquiring commercial anti-corruption compliance software.

10% 13%

29%

45%

61%

42%

Change in Global Anti-Corruption Staff in Past 12 Months

Increased

Remained

the same

Decreased

3% 3%

42% 44%

55% 53%

Expected Change in Department Workload in Next 12 Months

Increase

Stay the

same

Decrease

2015 2016 2015 2016

10% 13%

29%

45%

61%

42%

Change in Global Anti-Corruption Staff in Past 12 Months

Increased

Remained

the same

Decreased

3% 3%

42% 44%

55% 53%

Expected Change in Department Workload in Next 12 Months

Increase

Stay the

same

Decrease

2015 2016 2015 2016

41%

24%

22%

13%

Plans for Evaluating or Acquiring AC Software in Next 12-18 Months

Intend to implement a new

solution

Intend to evaluate and compare

offerings

Intend to research offerings

None of these / no interest in a

new solution

Plan to take action 59%

2%

60%

38%

Expected Change in AC-related Technology Spending in Next 12-18 Months

Increase

Remain

the same

Decrease

20162016

41%

24%

22%

13%

Plans for Evaluating or Acquiring AC Software in Next 12-18 Months

Intend to implement a new

solution

Intend to evaluate and compare

offerings

Intend to research offerings

None of these / no interest in a

new solution

Plan to take action 59%

2%

60%

38%

Expected Change in AC-related Technology Spending in Next 12-18 Months

Increase

Remain

the same

Decrease

20162016

Increase IncreaseIncreased Intend to implement a new solution

Stay the same Stay the sameRemained the same Intend to evaluate and compare offerings

Decrease DecreaseDecreased Intend to research offerings

None of these/no interest in a new solution

E X P E C T E D C H A N G E I N D E P A R T M E N T W O R K L O A D I N N E X T 1 2 M O N T H S

E X P E C T E D C H A N G E I N A N T I -C O R R U P T I O N - R E L AT E D T E C H N O L O G Y S P E N D I N G I N N E X T 1 2 - 1 8 M O N T H S

C H A N G E I N G L O B A L A N T I - C O R R U P T I O N S TA F F I N P A S T 1 2 M O N T H S

P L A N S F O R E VA L U AT I N G O R A C Q U I R I N G A N T I - C O R R U P T I O N S O F T W A R E I N N E X T 1 2 - 1 8 M O N T H S

↓

↓

19

Appendix: Summary of Region & Industry Differences

R E G I O N & I N D U S T R Y D I F F E R E N C E S : A N T I - C O R R U P T I O N P R O G R A M S ( 1 )

Table summarizes differences on key measures between regions and industries

If question or response is not shown, there are no notable differences to report

Others (Region) includes Central/South America, Eastern Europe, Africa/Middle East

2016 TOTAL REGION INDUSTRY

North America

Western Europe

Asia-Pacific Others FinanceNon- Finance

Anti-corruption program in place 6+ years 59% 57% 49% 70% ↑ 55% 66% ↑ 49%

Included in anti-corruption program

Due diligence all new business partners 86% 84% 86% 89% 83% 92% ↑ 78%

Auditing compliance activities 86% 82% 85% 90% 85% 91% ↑ 79%

Alerting to new and emerging risks 82% 77% 77% 84% 88% 88% ↑ 72%

Ad hoc reviews of all existing partners 75% 70% 69% 82% 74% 83% ↑ 64%

Risk ranking of business partners 70% 65% 75% 69% 71% 78% ↑ 58%

Regular automated employee monitoring 59% 42% ↓ 54% 70% 70% 71% ↑ 43%

Regular automated partner monitoring 58% 41% ↓ 55% 69% 65% 72% ↑ 39%

Currently leveraging in anti-corruption compliance efforts

CRM systems 48% 42% 54% 44% 56% 57% ↑ 35%

Expense systems 48% 58% ↑ 45% 47% 38% ↓ 43% 54% ↑

GRC systems 48% 44% 46% 53% 49% 57% ↑ 36%

Monitor business partner integrity at least quarterly 27% 17% 17% 34% ↑ 41% ↑ 35% 17%

Risk-rank countries 83% 81% 79% 84% 88% 87% ↑ 78%

20






North America

Western Europe


Has had major impact on anti-corruption policies and procedures

FCPA 56% 60% 43% ↓ 65% 50% 50% 62% ↑

Local/other regulations 55% 37% ↓ 49% 62% 72% ↑ 64% ↑ 43%

Bribery Act 2010 (UK) 53% 45% ↓ 55% 59% 56% 56% 50%

FATCA 48% 17% ↓ 46% 61% ↑ 67% ↑ 65% ↑ 20%

Dodd-Frank Act (US) 35% 39% 27% ↓ 34% 37% 39% ↑ 30%

Travel Act (US) 16% 6% 5% 34% ↑ 19% 23% ↑ 9%

Clean Companies Act (Brazil) 13% 11% 2% ↓ 17% 23% 15% 11%

Concern about breaking anti-corruption has regulations delayed or stopped

Working with a business partner 65% 70% 71% 52% ↓ 70% 56% 76% ↑

Working in a particular location 53% 61% 56% 45% 49% 45% 62% ↑

Entering emerging markets 51% 58% 51% 46% 48% 45% 57% ↑

Expanding business in emerging markets 48% 51% 52% 40% ↓ 52% 44% 53% ↑

Delayed or called off endeavor because...

Could not get information to assess risk 53% 50% 51% 51% 64% ↑ 50% 57%

Question legality because regulations unclear 49% 53% 46% 44% 53% 43% 56% ↑

21






North America

Western Europe


Have lose business to unethical competitor 26% 29% 19% 21% 36% ↑ 15% 41% ↑

Should always report suspected bribery 64% 52% ↓ 62% 69% 76% 68% ↑ 58%

Positive aspects of anti-corruption regulations

Helps company reputation/image 84% 71% ↓ 89% 88% 88% 87% ↑ 79%

Reinforces compliance message internally 76% 77% 72% 78% 73% 74% 78%

Money saved 57% 46% ↓ 55% 60% 68% ↑ 62% ↑ 51%

Improved relationships with partners 55% 46% 51% 59% 62% 56% 52%

More level playing field 53% 53% 52% 55% 53% 48% 60% ↑

Improved operational efficiency 45% 32% 35% 57% ↑ 50% ↑ 50% 38%

Technology used in managing anti-corruption programs

Sanctions and watch list services 72% 73% 79% 75% 59% ↓ 79% ↑ 63%

In-house developed software 32% 21% ↓ 34% 35% 39% 34% 28%

Anti-corruption compliannce on GRC software platform 27% 27% 20% 29% 32% 31% ↑ 22%

Is realistic to ban facilitation payments entirely 32% 40% 34% 33% 18% ↓ 27% 39% ↑

Have changed anti-corruption policy (re: facilitation payments in last year) 13% 6% 9% 17% ↑ 22% ↑ 18% ↑ 7%

Plan to change anti-corruption policy (re: facilitation payments in next year) 13% 1% 2% 26% ↑ 26% ↑ 19% 7%

22

R E G I O N & I N D U S T R Y D I F F E R E N C E S : D U E D I L I G E N C E





North America

Western Europe


Confident due diligence information is accurate and complete 63% 54% 71% ↑ 59% 76% ↑ 72% ↑ 52%

Always perform due diligence into backgrounds of

M&A targets 66% 79% ↑ 66% 63% 53% ↓ 64% 69%

Senior level executives/board members 60% 58% 56% 68% ↑ 53% 67% ↑ 50%

Sales agents 59% 56% 64% 60% 59% 63% ↑ 55%

Customers/clients 58% 44% ↓ 56% 63% 68% 76% ↑ 33%

Third-party agents or consultants 56% 56% 55% 58% 55% 61% ↑ 51%

Suppliers 50% 46% 40% 60% ↑ 51% 57% ↑ 42%

Frequency of due diligence updates

Annually 34% 22% 32% 45% ↑ 33% 40% ↑ 26%

Varies by target risk 37% 44% ↑ 45% ↑ 28% 35% 38% 35%

Types of research during preliminary due diligence

Collect Information on company ownership 86% 86% 91% 82% 85% 81% 92% ↑

Financial stability/performance 79% 79% 88% ↑ 77% 74% 75% 84% ↑

Explore partners’ government connections 62% 71% ↑ 59% 56% 62% 56% 69% ↑

Use of third parties by partner 42% 46% 42% 42% 39% 38% 48% ↑

Outsource due diligence partially or completely 31% 48% ↑ 32% 25% 15% ↓ 20% 46% ↑

23

R E G I O N & I N D U S T R Y D I F F E R E N C E S : R E S P O N D E N T P R O F I L E S



North America

Western Europe


Region

North America 28% 16% 43% ↑

Western Europe 20% 19% 21%

Asia-Pacific 33% 40% ↑ 24%

Other 20% 25% ↑ 13%

Company Size

Small (<500) 17% 9% 19% 16% 27% ↑ 22% ↑ 9%

Medium (501–10,000) 36% 39% 39% 34% 33% 32% 42% ↑

Large (10,000+) 47% 53% 43% 50% 39% 46% 49%

Industry

Commercial Banking 19% 7% 15% 31% 23% ↑

Retail Banking 13% 9% 8% ↑ 10% 27%

Insurance 8% 3% ↑ 9% 12% 5%

Investment Banking 6% 2% 9% 6% 8%

Manufacturing 9% 21% 8% 4% 2% ↑

Energy 6% 6% 5% 5% ↑ 11%

Healthcare 5% 9% ↑ 6% 1% 3%

IT/Telecoms 4% 4% 8% ↑ 3% 0%

Retail 3% 7% ↑ 3% 1% 3%

50

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