We all know that business travel promotes
business relationships, helps companies establish new markets and brings key
people closest to the customer—traits that are essential for gaining a
competitive edge in today's dynamic market. But despite companies' best
intentions, some bad actors use corporate travel and expenses to win business
via bribery and corruption.
Per The World Bank, "About $1 trillion is paid each
year in bribes around the world." In response, governments and trade
groups have created hundreds of laws, rules and regulations on bribery and
corruption. The U.S. Foreign Corrupt Practices Act is the best known.
The FCPA allows U.S. companies to pay for government
officials' "reasonable and bona fide expenditures, such as travel and
lodging expenses" in limited situations like demonstrations or site
visits. However, using travel to hide bribes is a common theme in FCPA
investigations. I know of nine FCPA cases in 2016 that involved fraudulent
trips; two involved domestic travel.
Despite the global complexity of all these rules governing
business expenses, it takes only a single employee for an entire company to be
at great financial and reputational risk (see the September 2015 Yates Memo
from the U.S. Department of Justice). Posting a travel policy that bans bribery
isn't enough. In a case from December, the SEC stated a company "failed to
prevent such payments or detect red flags" despite having a clear policy
in place.
Failure comes at a hefty cost. Government fines can reach
millions of dollars, in addition to the disgorgement of 'illicit profits.' One
large global retailer has already spent $612 million on internal FCPA compliance
costs since 2013 and is tracking toward a daily cost of $1 million. These are
costs the shareholders certainly don't welcome. Worse, it's the reputational
risk: This impact can reach 9 percent of a firm's total profits over three
years, according to Goldman Sachs and The Economist.
The risk looks even higher in 2017. Bribery "tips"
increased 62 percent last year, due in part to million-dollar rewards from
Dodd-Frank's whistleblower protections. To investigate the influx of leads, the
FBI launched three international corruption squads and the DOJ doubled the
number of corruption prosecutors.
Domestic travel programs face bribery and corruption risks,
as well. In the U.S., 36 states have laws specifically prohibiting commercial
bribery, while the Travel Act makes violations of those state laws a federal
crime if the bribery involved travel.
The complexity and global scope of the problem
needs a crossfunctional approach. A holistic tactic brings together compliance,
finance, travel, analytics and even sales functions within a company. Putting
more spend under management and digitally transforming manual processes is
critical to what the SEC calls "program effectiveness." This means
fully automating everywhere, not just primary systems in major markets. Bribery
is a risk that carries a heavy cost. Effectively managing this risk can create
a competitive advantage for your organization's growth.