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The MOJ guidance states that bribery prevention procedures should be ‘proportionate to risk’ – in other words, the nature, complexity and scale of the organisation’s activities and the markets in which it operates should dictate the level of action. It also says that an organisation should assess the nature and extent of its exposure to potential risks of bribery on its behalf by people associated with it. This assessment should be clearly documented in order that compliance efforts can be tailored appropriately.
Associated Persons
The US FCPA and the UK Act present challenges for oil and gas companies operating globally in a high-risk industry with a prevalence of third parties including sub-contractors and agents. Most companies already have anti-bribery procedures in place for their employees, but the need to risk- assess and monitor third parties brings enormous complexity, particularly for smaller companies who might not have the resources of a dedicated compliance department. Nearly all of the bribe payments that have been the subject of the 2013 US enforcement actions were made through third party intermediaries for example; “politically connected” agents, customs brokers, joint venture partners, freight forwarding agents and distributors6
. Consequences
So what does this mean for oil and gas companies? The risks of non- compliance are considerable, not just in terms of the fi nes that can be levied (the average penalty paid in FCPA cases in 2013 was $28m7
), but also
because companies can be forced to pay back any profi ts arising from the corrupt behaviour. There are also other considerations: the management time and resources involved in defending litigation; reputational damage; and the risk that the company will be dissolved8
or disbarred from working with or for
national governments. It is also common for cases to result in the imposition of a corporate monitor for a period of time post event, with its own cost and reputational impact.
The far reaching consequences of a regulatory breach reinforces the need to have stringent procedures in place, this is particularly true in the UK where the introduction of Deferred Prosecution Agreements (DPA) on 24 February 2014 provides a mechanism for effectively settling the criminal liability of a corporate entity, without prosecution, in return for the company agreeing to a number of conditions thereby avoiding a lengthy court case. According to the current guidance, when considering whether to enter into a DPA rather than proceeding to court the SFO may consider:
6 Source: FCPA Digest, Shearman & Sterling LLP, January 2014 7
Source: FCPA Digest, Shearman & Sterling LLP, January 2014 (Adjusted Average Penalty). These fi nes are levied according to US Federal Sentencing Guidelines. The UK has recently issued its own sentencing guidelines which will come into force later in 2014.
8
The Brazilian Anti-corruption Law, effected on 29 January 2014 allows the courts to dissolve a company in particularly egregious cases.
9
Deferred Prosecution Agreements Code of Practice (
http://www.sfo.gov.uk/about-us/our-policies-and-publications/ deferred-prosecution-agreements-code-of-practice-and-consultation-response.aspx).
...The existence of a proactive corporate compliance programme both at the time of offending and at the time of reporting but which failed to be effective in this instance.” 9
“
It is therefore in the interests of the corporate to establish an effective compliance programme that demonstrates the efforts taken to prevent bribery by employees or associated persons. The UK ‘adequate procedures’ requirements may seem excessive but with many countries introducing equivalent requirements in respect of internal procedures and controls to prevent bribery, if a corporation conforms to the UK Act it is likely that their compliance framework may meet many of the requirements of equivalent legislative developments.
© 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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BRIBERY & CORRUPTION
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