< PrevNext > Bribery: The Hidden Risk Inside Business Travel Programs By Infosys Consulting principal Isaac Bowman / 27 January 2017 Share 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.