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Why Anti-Bribery Training and Policies are Two Essentials to Fuel FCPA Compliance

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Why Anti-Bribery Training and Policies are Two Essentials to Fuel FCPA Compliance

FCPA compliance is a hot topic in the oil & gas industry. Unfortunately, hearing about violations in this sector isn’t all that unusual. In fact, according to The Network’s research (based on industry findings over the past five years), more than 20 percent of FCPA violations have been against Oil & Gas companies. The law explicitly prohibits “giving or promising anything of value to obtain or retain business or to gain for an improper advantage.” However, the highly competitive nature of the industry leads to companies attempting to grab market share at any cost in a heavily regulated environment.

As a result, there are numerous cases where companies looking to drill overseas made kickback payments to customs brokers, who in turn paid off foreign officials in order to obtain or extend permits or contracts necessary for operating offshore oil rigs or drilling in certain fields. In 2013, this illegal strategy cost oil & gas companies more than $550 million in disgorged profits and fines from the DOJ and SEC.

So what are some of the red flags your employees need to watch out for? First, examine the reputation of the country where you are planning to drill. In many countries, payments to foreign officials are accepted as a normal order of business, and the risk of bribery may be high. An example is Nigeria, where several FCPA violations have reportedly occurred, far more than in any other country. If you are planning to operate in a high-risk environment, you must ensure the implementation of stronger compliance controls and monitoring tools than usual.

Second, all third-party agents or brokers need to be vetted. Employees need to ask themselves questions like: Is this person knowledgeable and experienced? Are they charging us a reasonable rate? Will they attest to my company’s policy regarding anti-bribery?

If you don’t get a definitive “yes” to these questions, it may be a sign that this agent or broker is making illegal payments to foreign officials. Furthermore, during the vetting process, check for third parties who  maintain close relationships with foreign officials or hold an interest in the same companies as those officials. Obviously, the risk of bribery is much higher in these situations.

So what are the must-haves for FCPA compliance in the oil & gas industry? While an effective FCPA compliance program can be complex and have many components, two items are key:

Inform your employees with the help of anti-bribery training

Inform your employees of just what could be considered a bribe and the risks that could be incurred by putting these red flags in your FCPA policies and anti-bribery training. Help them to understand how the law applies and provide them with scenarios that illustrate how seemingly well-intentioned business transactions can quickly cross the line into illegal bribes. Take full advantage of your policy management system to distribute and track your anti-bribery policies to your associates located in the highest risk areas. It’s important that your anti-bribery training, as well as your policies, are applicable to the geographies where they operate and are culturally appropriate to the region.

Demonstrate strong “tone at the top”

Demonstrate strong “tone at the top” and a commitment to a well-structured anti-bribery compliance program where employees understand their accountability. Use your policy management system not only to distribute and store your anti-bribery policies, but also as a tool for communication. Embed anti-bribery training into your policies so that they become one and the same. These measures demonstrate your diligence toward implementing and maintaining a strong anti-bribery compliance program.

For an example of how a commitment to a strong compliance program can save a company, take the case of the offshore oil drilling company Pride International (which was acquired in 2011 by Ensco plc). Because of its commitment to a robust anti-bribery program, in late 2012 Pride/Ensco earned an “early release” from a deferred prosecution agreement with the DOJ, for FCPA violations dating back to the mid-2000’s. To quote Dan Nardello, a former assistant U.S. attorney and founder of investigation firm Nardello & Co., in an article in Compliance Week, “The case is an example of where, if the right controls are put in place and if there is a really robust effort to change behaviors, you’re going to get some credit.”

About the Author

Keshav Nair, Market Research Analyst. Keshav provides subject-matter expertise regarding competitive and industry analyses, making recommendations regarding the strategic positioning of The Network's GRC software solutions, and is a frequent contributor to industry blogs. Connect with Keshav on LinkedIn
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