In late February, Transparency International (“TI“) published the 2017 Corruption Perceptions Index (“CPI“). This is the 23rd annual edition of the CPI, which ranks countries according to the levels of public sector corruption, as perceived by business people and country experts. The CPI ranking aggregates data from a number of different sources, including various polls by institutions such as the World Bank and World Economic Forum. Countries and territories are given a score between 0 and 100, with 0 being highly corrupt and 100 being very clean and ranked from cleanest to most corrupt.
These scores and rankings provide businesses with a useful indicative measure of corruption risk associated with the various jurisdictions in which they operate, and identify locations which may require enhanced controls. In this briefing we provide an overview of some of the findings and implications for businesses.
Best and worst performers
This year’s results show that the majority of countries are making “little or no progress in ending corruption“. The average country score remains unchanged from the 2016 average of 43. The ‘cleanest’ countries this year were New Zealand and Denmark with scores of 89 and 88 respectively (though both of these scores were lower than in 2016 where they both achieved 90). Western Europe was the ‘cleanest’ region with an average score of 66, which was unchanged from 2016.
The worst performers were Syria, South Sudan and Somalia, which ranked lowest with scores of 14, 12 and 9 respectively. Sub-Saharan Africa (with an average score of 32) was closely followed by Eastern Europe and Central Asia (with an average score 34) as the worst performers for 2017.
The UK and EU
The UK was ranked the 8th ‘cleanest’ country this year with a score of 82. This was an improvement of 2 places since last year and substantial progress from its score of 74 in 2012. Most EU member states scored relatively well and all scored at or above the country average of 43. Nevertheless, Croatia, Greece, Romania, Hungary and Bulgaria scored less than the midpoint score of 50.
Other regional results
On average, Eastern Europe and Central Asia (“EECA“), the Middle East and North Africa (“MENA“), Sub-Saharan Africa and the Americas (excluding North America) scored poorly in the CPI. The regional average score for EECA was 34.47. Notably, Russia was ranked 135th out of 180 and the Ukraine 130th. MENA fared slightly better with a regional average score of 37.89, while Sub-Saharan Africa received 32.02. After removing the scores for the USA and Canada, the remainder of the Americas received a regional average score of 41.90, with Venezuela, Haiti and Nicaragua being ranked as the lowest three countries in the region.
Implications for businesses
Regulators and enforcement authorities around the world continue to focus on corporate criminal conduct, particularly bribery and corruption. Both the US Department of Justice and the UK Serious Fraud Office have been active in investigating and prosecuting bribery, and many (albeit not all) of their recent enforcement cases concern conduct in identified ‘high risk’ jurisdictions.
Many of the countries in which UK and EU groups operate continue to score poorly on the CPI, including several of the major European economies, so companies must ensure jurisdiction is a central part of their risk assessment which influences the level and nature of their anti-bribery and corruption controls. Even where operations are not carried out in regions typically perceived to be ‘high risk’, a country by country risk assessment should be undertaken.
The CPI is not a perfect tool, not least because it measures only perceived compliance risk, and therefore has an inherent element of subjectivity. Nonetheless, in the absence of any other comprehensive and widely used metric, many companies will use the CPI as an element of their risk scoring matrix. To the extent they do so, those scores should be rechecked to ensure they align with the up to date version of the CPI.