The Wolfsberg Group Publishes Updated Anti-Bribery and Corruption Compliance Programme Guidance

On April 17, 2023, the Wolfsberg Group issued updated guidelines and best practices for financial institutions (FIs) on developing, implementing, and maintaining an effective anti-bribery and corruption compliance (ABC) program. The guidance replaces the Group’s 2017 edition, updating the red flags section and expanding on customer and transaction corruption risks.

Working together since 2000, the association of 13 global banks wrote this guidance with input from the UK Finance ABC Panel, the Basel Institute on Governance, and other initiatives, including the World Economic Forum Partnership Against Corruption Initiative. 

Red Flag Risk Indicators

The report outlines the following red flags of corruption and bribery that may warrant compliance staff conducting enhanced due diligence (EDD): 

• An individual or entity makes unreasonable/unsupported objections to ABC due diligence.
• The use of a shell company or some other non-transparent corporate structure. 
• Requests for payment of a commission before or immediately upon award of the contract.  
• Requests for unusual contract terms, such as deviation from progress payment models for construction contracts. 
• The use of nominees or proxies with no obvious commercial purpose. 
• Requests for payment in cash, advance payments, payment to an individual or entity that is not the contracting individual/entity, or payment into a country that is not the contracting individual/entity’s principal place of business.
• Unusual involvement of Public Officials in commercial matters 
• Sudden unexplained resignations of key professionals (e.g., members of the Board, lawyers, or auditors). 
• Recommendation(s) to rely on the customer’s and/or intermediary’s due diligence without written evidence of what the due diligence has entailed.
• High-value and or complex transactions that bypass or exclude the involvement of compliance in the review processes.

Best Practices to Mitigate Customer and Transaction Corruption Risks

The guidance also notes that since the goal of completely eradicating corruption and bribery risk is not realistic or achievable, the best practices listed throughout the paper aim to help FIs mitigate threats by taking a risk-based approach. Since there is no ‘one-size-fits-all’ ABC program, firms must identify the areas of elevated risk pertinent to their organization and deploy solutions accordingly.

Some best practices related to designing and running an ABC compliance program include: 

• Create a firm-wide policy to capture key elements of an ABC program.
• Ensure the program is overseen by senior management (i.e., someone with sufficient authority, expertise, and resources, with access to the Board or other governing authorities).
• Periodically assess the nature and extent of the bribery and corruption risks to which it is exposed and the effectiveness of controls designed to mitigate those risks.
• Establish risk-based controls that are aligned with the firm-wide policy.
• Communicate the ABC program through policies, procedures, and guidance, with risk-based training of relevant employees and certain third parties (where appropriate).
• Implement mechanisms to test compliance with policies and procedures and to identify third-party or employee-related risks.
• Non-compliance should be investigated, remediated, and control improvements implemented as appropriate.

Corruptions Perceptions Index

In our 2023 global compliance survey, we asked 800 C-suite and senior compliance decision-makers what typology is of the greatest concern when submitting suspicious activity reports (SARs). 36 percent of UK respondents – the highest percentage – said bribery and corruption. This data corroborates Transparency International’s global Corruption Perceptions Index (CPI), which saw the UK’s score fall sharply in January 2023, “resulting in a seven-place tumble in the global rankings from 11th to 18th”. 

To mitigate the risk of the UK’s score falling further, Transparency International listed the following recommendations to the government:

• Support the Public Service (Integrity and Ethics) Bill, which would implement a raft of changes to raise and enforce standards in government. 
• Appoint an influential Anti-Corruption Champion who would publish an ambitious anti-corruption strategy and deliver on the UK’s G7 commitments to tackle corruption and kleptocrats.
• Protect taxpayers’ money by fully disclosing the COVID-19 ‘VIP lane’ and future-proof public procurement by addressing conflicts of interest and subjecting all government emergency contracting powers to time limits and tougher scrutiny.

Key Takeaways

Compliance staff should ensure any guidance issued by the Wolfsberg Group is read alongside applicable legislation and advice published by authorities in the jurisdictions where they conduct business. 

When submitting a SAR related to a money laundering predicate offense, firms should also take note of the glossary codes provided by the UK Financial Intelligence Unit (UKFIU), which can be found towards the end of its second Suspicious Activity Reporting (SAR) Booklet of 2023. Particular categories and codes to take note of include: 

• Bribery and corruption: XXD9XX 
• Tax evasion offshore: XXTEOSXX 
• Tax evasion UK-based: XXTEUKXX 
• Proceeds from benefit fraud: XXF1XX
• Modern slavery and human trafficking: XXMSHTXX

More detail regarding reporting routes can be found in the National Crime Agency’s June 2022 publication, where firms are reminded that the relevant glossary code should be included in the Reason for Suspicion text space.