Home – How Energy Companies Can Power Up Better Due Diligence

How Energy Companies Can Power Up Better Due Diligence

Posted on 06-02-2016 by Amy Canning

 Forgive the pun, but it probably won’t come as a shock that the energy industry ranks near the top when it comes to bribery and corruption risk. Some of the largest enforcement actions ever under the U.S. Foreign Corrupt Practices Act have taken place within that sector, including a $365 million dollar penalty against Italian oil and gas company Eni S.p.A. and its Dutch subsidiary Snamprogetti Netherlands B.V. in 2010. And, as the fallout continues in the Brazilian Petrobras scandal—which has thus far mounted up to $2 billion in reported bribes, kickbacks and money laundering and left tens of thousands of people without jobs, according to Trace International—the financial penalties could easily eclipse past fines.

Find out what you face in our free eBook, A Pipeline to Corruption: Why Energy Industries Need Enhanced Due Diligence.

 Three Reasons the Energy Industry Needs Rigorous Due Diligence

Energy companies already fight public perception when it comes to bribery and corruption. In the wake of major corruption scandals—whether you’re looking at bribery allegations against wind energy farms in Spain or how corruption at Unaoil leads to political instability and fuels terrorism—companies in this vulnerable sector need to strengthen their due-diligence processes. But why is the industry so vulnerable?

  1. More risk. Very often, resources in oil-rich countries are controlled by the government, increasing the number of interactions between companies, third-parties operating on their behalf and foreign officials.
  2. More temptation. Such valuable resources—not just oil, but wind, solar, water and nuclear—offer high rewards, and many individuals are prepared to risk anything, including violating regulations, in order to gain a competitive advantage.
  3. More attention.  Recognizing the potential for corruption, enforcement agencies are zeroing in on the energy sector, expanding their investigations to include not just the major players, but the service and equipment providers, among others.

Given these vulnerabilities, companies need to implement due-diligence processes that dill deeper to uncover and mitigate risk.

 Mitigate Risk with Better Compliance Programs

To reduce risk, companies need a program that is supported from the top and includes education and training for internal staff as well as third parties working on your behalf. Likewise, companies need to implement a due-diligence and on-going monitoring process that takes a broad view, encompassing their entire network of partners, suppliers, agents and outside parties. What should it look like?

  1. Conduct verification/identification of entities and individuals using their self-reported data and vetted against news and publically-reported data such as incorporation documentation.
  2. Conduct batch checks of entities and individuals against sanctions, watch lists and PEPs.
  3. Conduct a risk assessment to determine needed level of due diligence.
  4. Initiate simple due-diligence checks for low-risk entities and individuals.
  5. Escalate to enhanced due-diligence checks for high-risk entities and individuals.
  6. Outsource due diligence for specialist checks of particularly high-risk entities and individuals.
  7. Maintain on-going monitoring with automated batch checks and negative news alerts for key entities and individuals.

 Are you confident in your current due-diligence and on-going monitoring process?  If you’re in the energy industry, you need to be—otherwise, you could find yourself facing some shockingly bad press and significant financial and reputational damage.

 3 Ways to Apply This Information Now

  1. Get your free copy of our eBook, A Pipeline to Corruption: Why Energy Industries Need Enhanced Due Diligenceto see what types of content supports thorough due diligence.
  2. Check out Lexis Diligence® to see how easy it is to identify and reduce risk.
  3. Share this blog on LinkedIn to keep the dialogue going with your colleagues and contacts. 


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