Transnational transactions and the potential for fraud and corruption

Over the last 10 or more years, the number of business transactions in foreign jurisdictions has skyrocketed. With the US and Europe’s economy facing slow growth, the markets abroad look very inviting. Many of my audit clients and public company clients are foreign firms doing business with or getting capital from US partners. Just how safe are these transactions? I have several seen several China and Vietnamese deals that were very dubious. You never know where your money is going!



I came across an interesting site ( www.transparency.org ) that offers the Corruption Perceptions Index which investigates each country’s business practices and ranks each country by perceived corruption. While one size never fits all, still some of the conclusions from the report are quite interesting and should be heeded. Certainly a US or Canadian firm doing business in foreign country should pay attention to this ranking and perform due diligence accordingly.



Interestingly enough, the good old USA comes in 22st . well behind our neighbor to the North, Canada (6). We are more corrupt than Chili (21) Barbados (17) and Iceland (11). Some other surprises await in the report:



Italy is 67th ( I guess a little graft over red wine never hurt anybody)
Panama is 73rd ahead of India (87) and China and (78) and Russia (154)
Be very careful of Somalia (178 and last) unless you are a pirate.