The 15th EY Global Fraud Survey - Cyprus Profile

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Articles | 21 May 2018 | EY Cyprus

The 15th EY Global Fraud Survey

Although the number of Cypriot companies that have fallen victim to fraud in the last two years is relatively low compared to other countries (4% compared to the total average of 11%), the level of bribery and corruption nevertheless remains quite high. This is according to the 15th EY Global Fraud Survey, which surveyed 2,550 executives across 55 countries, including 25 senior decision makers from Cyprus.

  • 80% of executives say bribery and corruption occurs widely in business in Cyprus
  • Only 4% of the survey participants in Cyprus stated that their companies have experienced a fraud in the last two years compared to the global average of 11%
  • 64% of respondents from Cyprus feel that management is responsible for ensuring that employees behave with integrity

This year’s survey found that despite regulators and law enforcement agencies around the globe imposing more than US$11b of financial penalties since 2012, 38% of global executives still believe bribery and corrupt practices remain prevalent in business. The corresponding figure for Cyprus is 80%, which ranks the country sixth globally in the relevant list, behind Brazil, Colombia, Nigeria, Kenya and Peru. Even though there has been a slight improvement from last year (the corresponding figure in last year’s survey was 82%), this percentage is still worryingly high.

Stavros Pantzaris, EY Cyprus Country Managing Partner, says:

“Perhaps the rising numbers of incidents of bribery and corruption that have come under the spotlight in recent months and the frequency in which they occur lately, may explain why executives in Cyprus have such a negative perception. The imposition of hefty penalties and long prison sentences will serve as a deterrent, although the aim should be a drastic culture change so that business people behave ethically not because they fear the consequences of non-compliance but because it is the right thing to do.”

More alarming is the fact that 52% of the survey participants from Cyprus have indicated that it is common practice to use bribery to win contracts compared to the global average of 11%. In fact Cyprus ranks first among the 55 participating countries. Similarly, 44% of those who participated in the survey pointed out that offering cash payments can be justified if they can contribute to the survival of a business during an economic downturn.

Andrew Gordon, EY Global Fraud Investigation & Dispute Services Leader, says:

“The lack of improvement in global levels of corruption over the last six years shows that unethical behavior in business remains a daunting challenge, despite intensified global enforcement. While corruption remains so prevalent, businesses remain vulnerable to significant financial and reputational harm. Management teams must identify and address the root causes of unethical conduct in their organization. Compliance programs need to keep pace with the impact of rapid technological advancements and the increasingly complex risk environment on business operations. More robust risk management should be considered a strategic means of improving business performance.”

Integrity sits high on the board agenda, the survey finds, with 96% recognising the importance of their organisation being seen to operate with integrity. The findings show that 64% of respondents from Cyprus feel that management is responsible for ensuring that employees behave with integrity while none of those who participated in the survey believe that acting with integrity is an individual’s responsibility. Organisations need, therefore, to make it clear that acting with integrity is everyone’s responsibility, and while that includes the importance of management setting the right ‘tone from the top’, it also involves individual employees.

The survey results indicate that there may be some level of disillusionment among companies with regards to their ability to stick to their word and take appropriate action when it comes to managing misconduct. Eighty percent of respondents from Cyprus believe their organizations have the clear intent of penalizing misconduct, but only 44% are aware of people having actually been penalized for breaching policies.

The survey also touched upon the subject of the EU General Data Protection Regulation (GDPR) which will come into force on the 25th of May 2018. When asked how well, if at all, they know GDPR, 56% of the respondents in Cyprus indicated that they know the subject very/fairly well. This figure compares favourably to the global average of 40%. It is worth noting that participants from Western Europe seem to be more abreast with the subject (average of Western Europe is at 65%).

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