Late last year, the James Mintz Group released an interactive Foreign Corrupt Practices Act (FCPA) violations map highlighting all of the bribery "hot spots" broken down by industry. It is no surprise (or is it?) that the following countries have posted the highest fines levied against the energy sector:
- Nigeria — 15 cases
- Mexico — 10 cases
- Iraq — 6 cases
- Kazakhstan — 5 cases
- Indonesia — 5 cases
- Venezuela — 4 cases
Total FCPA fines levied against the energy sector equate to roughly the value of a day"s oil consumption in the U.S. in 2010 — approximately $2 billion USD or about 25% of global oil production. These numbers are too big to ignore.
Nigeria alone represents $1.3 billion in such fines. Although FCPA fines can be imposed in any industry and in any country, for the energy sector, these "hot spots" should be emphasized. Perhaps the business culture in some locales might make the bribing of officials a "business pre-requisite" but for any business under the jurisdiction of the U.S. Department of Justice or Securities and Exchange Commission — the enforcers of the FCPA — such risky behavior will inevitably lead to fines.
Ensuring that the proper Know Your Customer (KYC) processes are in place, including accurate identification of any known Politically Exposed Persons (PEPs) within your business relationships, is a good first step to risk reduction. Considering the volume of entities on PEPs lists, this process is not always a simple one. Fortunately, there are best practices available to assist in addressing these challenges. For example, the ability to microcategorize PEPs lists by level, country and term of office can help your organization streamline an FCPA screening program. Using appropriate screening processes to keep a tab on the hot spots for your business could help your firm be more efficient and protect your business from reputational damage.