Growing corruption risk should spur action from businesses

Edward James of Pinsent Masons, who specialises in helping businesses to manage corporate crime risk, was commenting after the 2022 edition of the CPI highlighted the need for action globally to address risks of corruption.

The CPI is published by Transparency International and ranks 180 countries and territories by the perceived levels of corruption in their public sector. The CPI uses a scale ranging from zero to 100, with zero meaning that the country is perceived to be highly corrupt and 100 meaning the country is considered very clean.

According to the 2022 index, corruption levels in 124 out of 180 countries are considered to have remained stagnant, while the number of countries considered in decline is increasing.

James said: “The perceptions reflected in the 2022 edition of the CPI appear to be reflected in global enforcement trends where companies have been subject to enforcement action based on corruption in Sub-Saharan Africa.”

“In 2023, companies may face a world of ‘permacrisis’ with various imminent issues competing for their attention. The 2022 edition of the CPI suggests that whilst corruption may be something that has been around for years, it is here to stay and should remain an issue that is a top priority risk area for companies to proactively deal with,” he said.

In recent years, very few countries have improved their CPI score. Examples include South Korea, Moldova, Vietnam, Maldives and Angola. Countries that have seen a decline in their scores include Austria, Malaysia, Pakistan, Canada and the UK, with the latter’s score falling from 78 in 2021 to 73 in 2022.

Denmark now independently heads the rankings in the index as the least corrupt country with a score of 90. In the 2021 CPI, Denmark shared the top position with New Zealand and Finland when all three countries scored 88. 

Somalia now ranks as the most corrupt country, based on perceptions, with a score of 12. South Sudan was ranked bottom in 2021 with a score of 11. South Sudan remains near the bottom of the rankings in the 2022 edition, alongside countries such as Syria, Venezuela, Yemen, Libya and North Korea.

When considered from a regional perspective, the lowest scoring region was Sub-Saharan Africa with an average score of just 32 out of 100. Johannesburg-based James said that this suggests that corruption remains a challenge in Sub-Saharan Africa with little improvement. Western Europe and the European Union were the highest scoring region.

James said that the findings from the CPI 2022 also highlighted the link between conflicts and corruption and the mutual breeding ground that is created. Transparency International observed that many of the worst performing countries are currently experiencing armed conflict or have had an armed conflict in recent times. Similarly, it also viewed corruption as a threat to global security and criticised the enabling role played by advanced economies in receiving “dirty money” from “kleptocrats” and in facilitating “transnational corruption”.

Recommendations that Transparency International made to help combat corruption include reinforcing checks and balances and the promotion of the principle of separation of powers; promoting and upholding the public’s right to access to information; limiting the influence of the private sector over governments by regulating lobbying and promoting transparency in decision-making; as well as combating transnational forms of corruption.

James said that the recommendation to limit private influence is a significant new addition to the recommendations as it recognises that the unchecked influence of the private sector over governments can contribute to increased corruption or can exacerbate existing corruption issues in a state.

Tom Stocker, who specialises in global investigations at Pinsent Masons, said: “In 2022 many global companies struggled to keep up with the unprecedented rate of change to sanctions brought about by the conflict in Ukraine. In the latest edition of the CPI, Transparency International has indicated that the world is in urgent need of action to address corruption.”

“A particularly striking finding is that 155 countries have either declined since 2012, or not made significant progress against corruption in a decade. Whilst sanctions will remain a key compliance area for companies to manage this year, global companies should ensure that they reset their focus on proactively identifying and dealing with corruption risks through well considered compliance controls,” he said.

Co-written by Kgaugelo Sehoole of Pinsent Masons.