Companies are unprepared for cross-border investigations, reveals KPMG survey

In a KPMG Cross-Border Investigations survey of 60 global executives, 90 per cent indicated that the number of cross-border investigations have either increased or remained the same over the last year. However, more than 50 per cent of these executives also reported that they have limited protocols in place and have insufficient resources to conduct cross-border investigations.

Phil Ostwalt, global co-ordinator for investigations for the global forensic practice at KPMG and investigations leader in the US, said: ‘Conducting cross-border investigations is no simple endeavour. Add the complexities of legal and cultural differences and you have one of the biggest challenges facing global corporations.’

Only 35 per cent of respondents in KPMG’s survey indicated that their companies conduct cross-border investigation training each year, a vast decline from KPMG’s 2007 survey when that figure was 80 per cent. And 42 per cent of the executives believe their companies lack sufficient resources to handle cross-border investigations.

Foreign data privacy laws and regulations pose some of the greatest challenges to conducting cross-border investigations because of restrictions on the kinds of data that can be collected and transferred out of the jurisdiction. Many countries have enacted laws that place a high priority on protecting personal data, including establishing a fundamental legal right on the privacy of personal data, even if such data is contained on an employer’s system or computer.

In fact, more than 46 per cent of the respondents in KPMG’s survey reported that their greatest challenge in conducting cross-border investigations is handling data privacy issues.

Cultural differences remain one of the top three challenges in conducting cross-border investigations, which is up from 26 per cent in 2007 to 37 per cent in 2013. No longer can companies rely on procedures and resources used for domestic investigations. Instead, they must be customised to comply with different local laws and to respect diverse cultures and customs.

Ostwalt said: ‘You simply cannot conduct a cross-border investigation without people who know the intricacies and idiosyncrasies of certain jurisdictions. What may be acceptable to say or do in one culture may totally offend someone from another culture. Loyalties also differ by culture and some employees may be hesitant to speak out against a countryman for the benefit of a foreign company.’

His advice for organisations is to proactively develop case management and investigative procedures that align with the company’s values, standards and principles and take into account region-specific or country-specific requirements, customs and practices. One size does not always fit all, Ostwalt said, and procedures will need to be customised to meet the requirements of a particular jurisdiction.

As far as the types of allegations that companies are conducting, bribery and corruption investigations was identified by more than 67 of respondents. This was closely followed by allegations of embezzlement or misappropriation, selected by nearly 65 per cent of the participating executives, and conflicts of interest, which was chosen by 63 per cent of respondents.