Friday, 13 February 2009

Corporate bribery

Former investment banks are in the spotlight again, this time relating to allegations of corporate bribery.

According to a report in the Financial Times, Morgan Stanley's global head of real estate investing has been suspended following disclosure of a Securities & Exchange Commission (SEC) filing that indicates a China-based employee violated the foreign corrupt practices act.

Morgan Stanley was a major investor in Chinese real estate, a sector which is believed to be plagued by bribery and corruption. A number of fraud and risk specialists I have spoken to in recent weeks have highlighted increasing reports of corporate bribery and corruption where business contracts are awarded on the basis of financial rewards.

In the US and the UK corporate bribery can attract substantial fines, which often exceed the initial bribe. According to Kroll's 2008-2009 Global Fraud Report, regulatory and compliance breaches increased from 19% to 25%.

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