Ericsson revealed an internal investigation found serious compliance breaches in Iraq, which included corruption among salespeople and consultants, and possible payments to terrorist organisations.
The issue surrounds unusual expense claims in Iraq dating back to 2018 which triggered a review from Ericsson to unearth compliance concerns in 2019.
Ericsson found “serious breaches of compliance rules” and evidence of “corruption-related misconduct”. They involved making monetary donations with no clear recipient; paying suppliers for work with no documentation or scope; inappropriate travel and expense; and improper use of sales agents and consultants.
The investigation also found payments to intermediaries and the use of alternative transport routes possibly to avoid Iraqi customs, a serious concern as terrorist organisations such as ISIS control some transport routes. However, the company stressed no Ericsson employee was directly involved with financing a terrorist organisation. Potential money laundering schemes were also identified.
CEO Borje Ekholm told local Swedish paper Dagens Industri: “What we are seeing is that transport routes have been purchased through areas that have been controlled by terrorist organisations, including Isis,” reported Financial Times.
The investigation resulted in several employees leaving the vendor and termination of third party relationships.
In a statement, the vendor said: “Ericsson takes any allegation of impropriety extremely seriously and welcomes any new facts brought to light as a result. This allows us to sharpen our processes further and target any wrongdoing.”
Shares in the company fell 9% since the news came to light.