Compliance Glossary

Red Flags

Detecting and preventing acts of corruption in the workplace can be challenging, especially when corrupt actors work intentionally to conceal their actions from discovery. Compliance auditors and investigators can uncover acts of corruption by spotting red flags, suspicious activities or behaviors that demand further investigation.

What are Red Flags of Corruption?

Red flags of corruption are activities, circumstances, or other indicators that may indicate the presence of corrupt activities within an organization or workplace.

At the very outset, it must be noted that the presence of red flags should not necessarily be treated as evidence that corrupt activities are taking place. Rather, red flags should be observed and treated as a potential starting point for institutional investigations into corruption, as well as compliance verification activities.

Red Flags of Corruption You Should Know

Compliance officials should remain on the lookout for red flags of corruption exhibited by employees of their organization. Below, we describe some of the most common red flags that can signal the possibility of corruption 

Red Flags of Corruption Within the Organization

Unnecessary or Excessive Purchasing

If an employee involved in procurement appears to purchase excessive quantities of goods from a specific vendor, or goods that are not needed, the employee may be receiving a kickback or incentive from the vendor.

Employee Insists on Using a Specific Contractor

An employee who insists in procuring goods and services from a specific contractor could be benefitting from the deal through bribery, kickbacks, or another form of corruption.

Employee Accepts Unfavorable Purchasing Terms

An employee who accepts unfavorable terms from a vendor or contractor, such as paying an inflated price, or agreeing to pay cash up-front when it is not the standard, may be receiving compensation from the contractor as bribes or kickbacks.

Employee Demonstrates an Unexplained Wealth Increase

An employee who demonstrates an unexplained increase in personal wealth and fortune may have participated in corruption. Employees can receive corrupt payments in many forms, including – but not limited to:

  • Cash payments
  • Material gifts
  • Favors, including reciprocal acts of corruption
  • Low-interest “loans” that are not meant to be repaid
  • Gift cards or credit cards
  • Overpaying for a purchase
  • Personal Commissions
  • Free use of a domicile or vehicle
  • The opportunity to purchase a valued resource or commodity below the market rate

Employee Rarely or Never Takes Vacation

An employee who avoids taking vacation wishes to ensure that nobody else will cover their role in their absence. They may perceive that their presence in the workplace is required to continuously hide their corrupt actions.

Responding to Red Flags of Corruption

Organizations should develop systems that allow them to detect the red flags of corruption, investigate these occurrences to establish whether corruption is taking place, eliminate the corrupt behaviors, and update anti-corruption policies and training to prevent a repeat occurrence. 

Organizations should:

  • Establish, maintain, and enforce a strict anti-corruption policy
  • Establish and publicize clear and harsh penalties for corrupt behavior.
  • Set up an anonymous whistleblower program where employees can report instances of corruption or red flag indicators they observe in the workplace.
  • Establish a monitoring system to detect and prevent corruption in high-risk employees and key functional areas of the business.
  • Centralize compliance operations with software technologies.
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