UK companies have among the highest number of whistleblowing hotlines, but have among the worst records for punishing fraud, bribery and corruption.

Ernst & Young’s 2012 Global Fraud Survey, Growing Beyond: a place for integrity shows high risks of fraud and bribery despite 90 percent of UK companies having set up whistle blowing hotlines, compared to less than half of companies globally. Despite this, UK companies have shown weakness in punishing bribery and corruption. Only 24 percent have taken any action compared to 40 percent globally.

Equally, only just over a quarter of executives (26 percent) consider that UK enforcers are willing to prosecute cases of bribery and corruption and are effective in securing convictions. The survey found that 42 percent support regulators using financial incentives to encourage whistleblowers, following similar provisions in the US Dodd-Frank Act. John Smart, Partner, Ernst & Young’s Fraud Investigation & Disputes Services practice, says, “Growth and ethical business conduct in today’s markets can appear to be competing priorities, and many executives underestimate the serious risks. Boards need to put pressure on management to conduct more frequent and more robust anti-bribery and anti-corruption risk assessments and they need more tailored reporting to drive improved compliance.”

“There needs to be a more credible alternative for employees to report concerns. Companies should ensure effective mechanisms for internal whistleblowing – for example, 24 hour hotlines in local languages – but also that the corporate culture encourages internal reporting of issues. “Businesses must also be aware of heightened scrutiny and ensure clear processes are in place for prompt investigation and communication with enforcement agencies.” More than half of UK senior leaders would not rule out unethical conduct to survive. Ernst & Young’s 2012 Global Fraud Survey, Growing Beyond: a place for integrity also shows that 54 percent of UK executives would not rule out unscrupulous behaviour, such as misstating financial statements, or providing personal gifts or cash to secure business. This is despite the UK Bribery Act coming into force, under which firms face criminal fines or imprisonment of executives. The survey of CFOs, heads of legal, compliance and internal audit, found that those who would provide personal gifts to secure business almost doubled in two years. A few even said they would give cash payments to win or retain business during the downturn.

CFOs are among the most influential executives reporting to the board on fraud, bribery and corruption issues. The results from the nearly 400 global CFOs surveyed, however, suggest that a minority could be part of the problem. The survey found 15 percent of CFOs would be willing to make cash payments to win business and 4 percent said they would be willing to misstate financial performance. Less than half had personally attended anti-corruption or bribery training. This group of executives is not large in absolute numbers but, given their responsibility, they represent a huge risk to their businesses and their boards. John Smart says, “The CFOs we work with are committed to extremely high ethical standards. But the CFO’s influence within companies means they have a key role in preventing fraud, bribery or corruption and they need to redouble their efforts to set the right tone. They need to ensure that they have performed a thorough risk assessment around fraud, bribery and corruption, particularly in high risk markets.”