Curbing Corruption in the Oil and Gas Industry

ANTI-CORRUPTION OVERVIEW IN THE OIL AND GAS INDUSTRY.

Corruption in the Oil & Gas sector is a persistent source of concern for the extractive industry. Because of the sector’s profitability, particularly in oil and gas exploration and production, it is plagued by various forms of corruption ranging from money laundering to bribery to financial terrorism. As a result, one major challenge for those working in this sector is determining how to reduce the risk of becoming entangled in the quagmire of corrupt activities, whether within their own corporation or through third-party interactions.

Background to Corruption in the Oil & Gas Industry in Nigeria

The Oil and Gas industry like every other industry is not immune to corruption and has been fraught with this problem since oil was first discovered in the Southern region of Nigeria. Efforts from the Nigerian government to investigate and curtail this ill can be traced to the 1950s during the Olusegun Obasanjo military regime. A panel of enquiry was set up to investigate a Two Billion, Eight Hundred Thousand Naira fraud which could not be accounted for by the NNPC. In 1979, The Shehu Shagari Administration set up another panel probing the missing funds in the NNPC but the outcome of the investigation proved unsatisfactory as the public opinion was that the mere finding and indictment of persons found guilty were insufficient as they were never persecuted and convicted by a court of law.

Further, during the oil boom, large sums to the tune of $12.2bn (which are yet to be recovered) was allegedly syphoned as revealed by the Panel on the Reorganization and Reform of Central Bank of Nigeria set up by the late Sanni Abacha on 1994 and chaired by Dr. Pius Okigbo.  In addition, Chevron Nigeria Limited was indicted for tax evasion in 1998 and 1999. The allegation was that the Company, in collusion with tax officials at the time, successfully avoided payment of tax to the federal government to the tune of approximately US$2.7 billion. These fraudulent occurrences are majorly because of the country’s anti-corruption regulation being weak or non-existent at the time. As a result, money intended for federal government infrastructure development work is constantly diverted by the politically corrupt. Nigerians stay living in abject poverty despite the nation being the 8^th largest producer of crude oil globally. Corruption within the Oil and Gas industry in the recent years has deteriorated owing partly to the fall in crude oil prices and the high-cost companies incur in refining these products. Naturally, seeking ways to increase profit is something that all firms contemplate, but in the oil and gas industry, the preferred path appears to be one that should not be taken: bribery and corruption. In 2011, two giants in the Petroleum Industry; the Royal Dutch Shell petroleum company and Eni came up on the radar for having conned their way out of paying the Federal Government revenues due from the grant of an Oil Prospecting License valued at $1.1bn. This they were able to do by awarding oil block OPL 245 to Malabu Oil and Gas Limited. A firm that was said to be held by Dan Etete, who was at the time, the petroleum minister. He had utmost discretionary power to award contracts and grant licenses for owning Oil blocks. This was in total violation of principles of the Code of Corporate Governance and likewise, against the extant Code of Conduct Bureau and Tribunal Act 1991. 

Evidently, the laws in place have been unable to serve as a deterrent. It is worth noting that in this scheme involving oil the companies and the former petroleum minister, some of those involved have been charged and arraigned in other jurisdictions; however, there has been no follow-up with this corrupt practice in Nigeria. 

Fighting corruption is never easy, especially in an industry as vast as oil and gas. Apart from being tedious in curtailing, it is equally an expensive venture. 

Areas of Nigeria’s oil sector vulnerable to corruption: 

• Award of oil exploration and production licenses 

• Award of contracts 

• Bottlenecks and inefficiencies in government-company relations 

• Bunkering (theft) of oil 

• Allocation of licenses for exporting crude and importing refined products

FRAMEWORK FOR ANTI-CORUPTION LEGISLATION IN NIGERIA.

These and other cases have long stained Nigeria’s reputation in the eyes of the international community, and as a result, the country has made and continues to make efforts to improve its anti-corruption and anti-money laundering legislation in order to provide a safer environment for indigenous and foreign investors.

Domestic Anti-corruption laws

1. The Corrupt Practices and Other Related Offences Act 2000

The Corrupt Practices and Other Related Offences Act 2000 established the Independent Corrupt Practices and Other Related Offence Commission and the commission is authorized to investigate and charge those found guilty of certain acts amounting to bribery. Under this Act, the offence of bribery has been specifically criminalized including actions such as; extortion, fraud and money laundering.

Some Important sections of the Act relating especially to Oil and Gas are highlighted below:

Offering bribed to Public Officers- Section 9: the Act criminalizes the act of an individual or body corporate offering bribe to a government official. Punishment is 7 years imprisonment  

Public offers demanding Bribe– section 10 a public officer demanding bribery in the course of his duty is guilty of an offense and subject to imprisonment for 7 years upon conviction

Fraudulently acquiring property– section 12 Any person who, being employed in the public service, knowingly acquires or holds, directly or indirectly, otherwise than as a member of a registered joint stock company consisting of more than twenty (20) persons, a private interest in any contract, agreement or investment emanating from or connected with the department or office in which he is employed or which is made on account of the public service, is guilty of an offence, and shall on conviction be liable to imprisonment for seven (7) years.

A Typical example of a case that went against this provision is the Royal Dutch and Eni matter, where they connived with the erstwhile Minister of Petroleum Dan Etete as discussed earlier. 

Gratifications that can be taken as inducements are also taken as forms of bribery-sections 12-19

2. The Advance Fee Fraud and Other Fraud Offences Related Act 2006

Criminalizes the following acts:

1. Obtaining by false pretenses with the intent to defraud Punishment is set at a term of imprisonment not more than 15 years but not less than 5 years.
2. An attempt to conduct financial transactions with proceeds obtained illegally, where it provides in – Section 7. A person who commits an offence under this section, is liable on conviction-

1. in the case of a financial institution or corporate body, to a fine of N1,000,000 and where the financial institution or corporate body is unable to pay the fine, its assets to the value of the fine shall be confiscated and forfeited to the Federal Government; or

2. in the case of director, secretary or other officer of the financial institution or corporate body or any other person, to imprisonment for a term of not more than 10 years and not less than 5 years.

3. Financial institutions can be equally liable where they fail to conduct due diligence in accordance with the Banks and Other Financial Institutions Act, 1991 as amended or the Money Laundering (Prohibition) Act, 2004 and can be liable on conviction to refund the total amount involved in the financial transaction and not less than N100,000 sanction by the appropriate financial regulatory authority. Further, a body corporate found guilty for any offence under this act stand the risk of an involuntary winding-up court order with forfeiture of all assets to the federal government

3. The Economic and Financial Crimes Commission Establishment Act 2004: 

The Act vests in the Commission several powers relating to the arrest of corruption practices which amongst others includes, Power to:

(a) cause investigations to be conducted as to whether any person, corporate Commission body or organization has committed any offence under this Act or other law relating to economic and financial crimes 

(b) cause investigations to be conducted into the properties of any person if it appears to the commission that the person’s lifestyle and extent of the properties are not justified by his source of income.  Offences under the act range from Offences relating to financial malpractices, to Offences relating to terrorism, to Offences relating to false information

The EFCC is basically responsible for investigating enforcing the provisions of act relating to money laundering and corruption.  Acts such as : 

a. the Money Laundering Act 2004; 2003 No.7 1995 N0. 13

b.   the Advance Fee Fraud and Other Fraud Related Offences Act 1995;

c. the Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act 1994, as amended; 

d. The Banks and other Financial Institutions Act 1991, as amended; 

  e. Miscellaneous Offences Act 

Also, any other law or regulations relating to economic and financial crimes, including the Criminal code or penal code

Under the EFCC Establishment Act, a part of the punitive measures put in place to curb corruption is the requirement of the forfeiture of all properties and assets of the accused upon conviction. These assets would include, any assets obtained through any of the offences listed in the act, any assets used in facilitating the carrying of an offence in the Act, any assets seized and detained by the commission in the interim and to which a court order is granted upon conviction for forfeiture. These forfeiture rights also extend to foreign assets.  

4. The Money Laundering Prohibition Act 2012:

This Act has regulatory presence and is set up with strict requirement to prevent money laundering or any equally related crime.  

Some important provisions include:

1. Limit in cash transactions-Section 1: sets a limit on cash transactions to five million naira for individuals and ten million naira for body corporates. Any person or company looking to handle more cash will definitely raise suspicions and inquiries from the commission charged with investigating such affairs which in this case will be the EFCC.

2. Limit on foreign transactions- Section 2: all foreign transactions exceeding $10,000 must be reported to the Central Bank of Nigeria stating the nature and amount of the transaction and the particulars of both the sender and receiver. Similarly, cash or assets the equivalent in excess of $10,000 must be reported to the Nigerian Custom service. Failure to comply shall amount to liability of forfeiture of 25% of the money or assets or to a term of not less than 2 years of both.

3. Anti-money laundering prohibitions- Section 15 through to 16: a person or body corporate who transfers financial resources of property obtained from illicit ways such as through drug trafficking, organized criminal group and racketeering, terrorism, terrorist financing, trafficking in human beings and migrants smuggling, tax evasion, sexual exploitation, illicit arms trafficking in stolen and other goods, bribery and corruption, counterfeiting currency, counterfeiting and piracy of products, environmental crimes, murder, grievous bodily injury, kidnapping, illegal restraints and hostage taking, robbery or theft, smuggling, extortion, forgery, piracy, insider trading and market manipulation and any other criminal shall be guilty of the offence of money laundering and punishable as set out under the Act governing each crime. Where a body corporate is involved, the courts can order an involuntary winding-up proceeding with all assets to be forfeited to the Federal Government

Financial Institutions under the Act are required to conduct due diligence on all individuals and body corporate conducting transaction through their institution by ensuring validation of all means of identity for individual and body corporates (certificate of incorporation). Where a financial institution fails to make a report to the appropriate authorities of cash transaction in violation of the stated amounts for individuals and body corporates, they are liable to a fine of not less than N250,000 and not more than N1,000,000 for every day of contravention.

5. The Miscellaneous Offences Act 1983 

Creates a number of offences, and in the event that any individual or body corporate violates the law, it establishes a range of offences with punishments. 

The relevant sections with regards to Oil and Gas matters would include offences relating to destruction or arson or vandalism which is a common occurrence in the Niger Delta region. Some of them include:

1. Willful destruction of public property- Section 3:  Punishment is imprisonment for a term not exceeding 21 years without the option of a fine.
2. Arson of public building, etc. – Section 4:  Punishment upon conviction is life imprisonment.
3. Tampering with oil pipeline- Section 7: Punishment is life imprisonment.
4. Importing or exporting of mineral or mineral ore and depriving Federal Government of revenue due- Section 8: Punishments includes life imprisonment with the minerals and vessels involved to be forfeited to the Federal Government
5. Unlawful dealing in petroleum products, etc. provides- Section 17:  Basically, dealing with petroleum products without obtaining the requisite permits and Licenses. Punishment upon conviction is life imprisonment with forfeiture of all good and vessels involved.  
6. Adulteration and sale of adulterated petroleum produce- Section 18:  Sale of adulterated petroleum produce is considered a crime in Nigeria and punishment upon conviction is imprisonment for a term not exceeding fourteen years without option of fine. The law however provides for a plea of ignorance in certain circumstances.

6. The Nigerian Extractive Industries Transparency Initiative Act 

The Act was set up to establish the Nigeria Extractive Industries Transparency Initiative (NEITI). The NEITI ensures, monitors, and assesses the transparency and accountability of extractive corporations’ reporting and financial disclosure.

Its major objectives as provided under the Act include the following:

1. to ensure due process and transparency in the payments made by all extractive industry companies to the Federal Government and statutory recipients.
2.  to monitor and ensure accountability in the revenue receipts of the Federal Government from extractive industry companies. 
3. to eliminate all forms of corrupt practices in the determination, payments, receipts and posting of revenue accruing to the Federal Government from extractive industry companies; 
4.  to ensure transparency and accountability by government in the application of resources from payment received from extractive industry companies,
5. to ensure conformity with the principles of Extractive Industries Transparency Initiative

Compliance with the NEITI is very important as the initiative requires that Companies in the extractive industry provide:

1. an accurate record of the cost of production and volume of safe of oil, gas or other minerals extracted by the company at my period, provided that such information shall not be used in any manner prejudicial to the contractual obligation or proprietary interests of the extractive industry company;
2. an accurate account of money paid by and received from the company at any period, as revenue accruing to the Federal Government from such company for that period; provided that such information shall not be used in a manner prejudicial to contractual obligations or proprietary interest of the extractive industry company or sovereign obligations of Government

Reports and documentation of the NEITI are usually subject to audit by an independent Audit company and audit is due for every 6 months of report. 

Punishments for non-compliance include: Section 16(b) of the Act sets out the punishments in contravention of the demands of the NEITI as follows:

1. Where a company gives false information or report to the Federal Government or its agency regarding its volume or production, sales and income; or (b) renders false statement of account of fails to render a statement of account required under this Act to the Federal Government or its agencies, resulting in the underpayment of non-payment of revenue accruable to the Federal Government or statutory recipients commits an offence and is liable on conviction to a fine not less than N30,000,000. Where the Company has been convicted of an offence under the Act, the court shall, in addition to the penalty prescribed there under, order the company to pay the actual amount of revenue due to the Federal Government. 

2. A Company which delays or refuses to give information or report under this Act, or willfully or negligently fails to perform its obligations under this Act, commits an offence and is liable on conviction to a fine not less than N30,000,000. The President also has the Power to suspend or revoke a Company’s license for failure to adhere to the mandates of the Initiative. It is important to note that Directors of the Company can also be liable on conviction to not less than 2 years imprisonment or a fine not less than N5,000,000 unless the director can prove that the offense was committed without his consent or connivance, and that the person exercised all such diligence to prevent the commission of the offense as ought to have been exercised by that person, having regard to the nature of his functions in that company and to all the circumstance. 

3. Further, a government official who provides the Federal Government or its agencies with a false statement of account or fails to provide the Federal Government or its agencies with a statement of account required under this Act, resulting in the underpayment or nonpayment of income due to the Federal Government or statutory recipients, commits an offense and is liable on conviction to not less than 2 years imprisonment or a fine not less than N5,000,000 unless that person proves that (a) the offense was committed without his consent or connivance, and (b) the person exercised all such diligence to prevent the commission of the offense as ought to have been exercised by that person, having regard to the nature of his functions in that company and to all the circumstance.

7. Code of Conduct Bureau and Tribunal Act 1991

The Code of Conduct Bureau and Tribunal Act established the Code of Conduct Bureau which is responsible for overseeing the operations of public officials and complaints of corruption or abuse of office is determined by the Tribunal. The Code of Conduct Tribunal is established as a disciplinary procedure. 

The Law is strict on giving “gifts” or other benefits to public officers as inducement for a favor. Public officers are also required to not abuse their offices whether directly or indirectly, especially carrying out actions that are prejudicial to the rights of another person.

Punishment ranges from removal of office to years of imprisonment, depending on the finding s of the Tribunal and the provisions of other contravened Law 

8. The Freedom of Information Act 2011 

Was signed into law by the Former President of Nigeria, Goodluck Jonathan and it summarily gives the Public (Nigerians) the right to access records of all government owner companies (Oil and Gas inclusive). 

Section 3 of the Act mandates all Public Companies to make all their records readily available and easily available for the public including putting out comprehensive details of their operations. The Act further requires public institutions to ensure all information is up to date and readily available to the public through various means, including print, electronic and online sources, and at the offices of such public institutions.

Members of the Public notwithstanding that they share no specific interest in the institution have a right to court to compel such institution in the event that the institution refuses.

A refusal by the institution has to come with good reasons but where unlawful denial is found by the court, the institution shall be liable upon conviction of the sum of N500,000

9. Banking and Other Financial Institutions Act: 

The BOFIA is an Act set up majorly to regulate the activities of banks and other financial institutions but because all companies operating within the Oil and Gas Industry would have dealings with Banks, it is also a relevant Regulation against corruption in the Oil and Gas Industry. All banks are charged with implementing internal policies that prevents any transaction that facilitates criminal activities, money laundering or financing terrorism.  With a valid court order acquired from the Federal High Court by the CBN Governor, the CBN has also been granted authority to freeze accounts judged to be engaged in the commission of any criminal act (fraudulent, terrorist-related, etc.)

10. Federal Inland Revenue Service Act 2007

The Federal Inland Revenue Service Act establishes the Federal Inland Revenue Service is the body responsible for collection of tax from companies to the federal government. All companies incorporated and carrying on business in Nigeria are required to file their tax returns with the FIRS. 

The FIRS is given the authority to call for produce or cause to be produced for examination books, documents and any other information at the place and time stated in the notice, which time may be from day to day, for such period as the service may deem necessary; or give orally or in written form, any requested information. This is usually to ensure transparency of companies and their activities especially with payment of all Tax proceeds due to the government. The Service is however required to give a notice of not less than 10 days and failure to comply with said notice amounts to a fine upon conviction equivalent to 100% of the amount of the tax liability. Section 35 of the Act empowers the Service to carry on investigation through Special Tax Officers to investigate any violation of the Act. Specifically, Section 32(3) the Service may cause investigation to be conducted into the properties of any taxable person if it appears to the Service that the lifestyle of the person and extent of the properties are not justified by his source of income. Section 42 of the Act considers it an offence to provide false information to the Service and any one guilty of this offence shall be liable on conviction to a fine not exceeding N200,000.00 in addition to payment of the amount of tax unpaid or to imprisonment for a term not exceeding 3 years or to both fine and imprisonment. Counterfeiting of documents is equally an offence under the Act and punishment upon conviction is a fine not exceeding N200,000.00 or to imprisonment for a term not exceeding 3 years or to both such fine and imprisonment.

11. The Fiscal Responsibility Act 2010 

Establishes the Fiscal Responsibility Commission, which has the power to amongst others: require the disclosure of information on public revenues and expenditures by any person or government institution, and conduct an investigation to see if someone has broken the law. If the commission determines that the person has committed a penal offense under the act, a report of the investigation will be sent to the Federation’s Attorney General.

Foreign anti-corruption laws 

The United Nations International Convention against Corruption: The only legally binding universal anti-corruption instrument is the United Nations Convention against Corruption. The Convention’s broad scope and the fact that many of its provisions are mandatory make it a one-of-a-kind tool for formulating a comprehensive response to a global problem. The Convention is ratified by the vast majority of United Nations member states Nigeria inclusive and it was signed on December 9 2003 and ratified on December 14 2004.

If these are not already crimes under domestic law, the Convention requires countries to create criminal and other offenses to cover a wide range of acts of corruption. In some cases, states are legally required to establish offenses; in others, they are required to consider doing so in order to account for differences in domestic law. The Convention goes beyond previous instruments of this type by criminalizing not only basic forms of corruption such as bribery and embezzlement of public funds, but also influence trading and the concealment and laundering of corrupt proceeds. Offenses committed in support of bribery including money-laundering and obstructing justice, are also dealt with. The Convention offences also deal with the problematic areas of private-sector corruption. Article 43 requires state parties to cooperate as fully as possible in the investigation and prosecution of offences defined in the Convention. In particular, the article states that “In matters of international cooperation, whenever dual criminality is considered a requirement, it shall be deemed fulfilled regardless of whether the laws of the requested State Party place the offence within the same category of offence or denominate the offence by the same terminology as the requesting State Party.”

The African Union Anti-Corruption Convention

The Convention was signed by delegates on December 12, 2003 and ratified on September 26 2006. In a bid to fight corruption in Africa, the State Parties amongst others, agreed to mandate all Public Officials to declare their assets at the time of assumption into office, adopt measures to combat and prevent corruption and other related offences within Private sectors adopt legislative measures to create, maintain and strengthen internal accounting, auditing and reporting systems for transparency of the Sectors within the State Parties

THE COST OF CORRUPTION

Although these expenses are difficult to estimate, the number of bribes paid each year in both emerging and developed nations gives you an idea of the scope of the problem. Bribery alone costs between between $1.5 and $2 trillion every year, (roughly 2 percent of global GDP). Because bribes are only one type of corruption, the entire economic and social consequences of corruption in its entirety are likely to be substantially higher. Companies that are caught or suspected of engaging in corrupt activities not only end up spending a lot of money on restitution measures, but their integrity and goodwill are almost completely destroyed.

The Halliburton Bribery Scandal Case Study

The Popular Halliburton Bribery case, otherwise known as the “Halliburton Bribery Scandal” rocked the corporate world during the ‘90s and still has some issues left unsolved especially within Nigeria. The case was one in which government officials were bribed with the sum of US$180,000,000.00m between 1994 and 2004 to facilitate the procurement of contracts allotted for the development of the Bonny Island Liquefied Natural Gas scheme. 

A network of shady banks and offshore tax havens were used to funnel approximately $182 million in bribes to Nigerian officials in exchange for $6 billion in engineering and construction work for an international consortium of companies that included a Halliburton subsidiary at the time.

The third-party used in facilitating this whole bribery scandal was a British lawyer by name Jeffrey Tesler, who through his law firm Tri-Star law firm, was paid heavy amounts of money to persuade him in using his connections and friendly relations with the Nigerian government officials in power at that time in hopes of facilitating the bribe for the award of a $6billion contract relating to Liquefied Natural Gas in Nigeria. 

Tesler was enticed to use Switzerland as a base for moving bribe money because of the country’s well-known bank secrecy laws, his preferred bank was HSBC Private Bank (Suisse), which has offices near luxury hotels in Geneva and Zurich. When US authorities seized 12 of Tesler’s Swiss accounts in 2013, five of them were with HSBC, the most of any bank. Although banks in Portugal and Seychelles were equally involved. According to reports, the cash was destined for Nigeria’s ruling party via the state-owned oil and gas company, the Nigerian National Petroleum Corporation (NNPC).

The company was successful in obtaining the contract and even a subsequent one, but operations were halted when the French government received information about shady money transfers from the company to public officers in Nigeria who held Swiss HBSC bank accounts. According to the leaked documents, Tesler had financial ties to two former Nigerian officials: now-retired Major General Chris Garuba, chief of staff to former Nigerian President Abdulsalami Abubakar, who allegedly received bribes as President, and Andrew Agom, a senior government official who was killed in a motorcade attack.

Although the French Investigators had no jurisdiction over the Halliburton Company, they shared findings with the US government and it was this information that was used in securing a conviction of individuals and foreign companies fund guilty. Kellogg, Brown and Root, a Halliburton subsidiary, was eventually charged with violating the Foreign Corrupt Practices Act and was convicted and fined $579 million by a US court, with its chief executive officer sentenced to seven years in prison. Tesler, the lawyer involved, eventually pleaded guilty to corruption charges in the United States for his role in the Scandal. KBR Inc KBR.N, a former engineering subsidiary of Halliburton Co HAL.N, pleaded guilty to federal charges that it paid $180 million in bribes to Nigerian officials over a decade in a decade-long scheme to secure $6 billion in contracts. 

Halliburton agreed to pay $382 million to settle the bribery case in a deal reached with the US Justice Department. According to the SEC, the $579 million in sanctions is the largest combined settlement ever paid by US companies under the act. The same cannot be said for the Nigerian Officials who participated in the bribery. 

Apart from the enormous costs incurred by the Halliburton Company in offsetting fines imposed by the government following convictions, they were also barred from bidding for future contracts from the Nigerian government. To this day, the company is known as one of the most controversial in existence, and its integrity is constantly called into question when dealing with other companies.

HOW COMPANIES CAN IMPLEMENT ANTI-BRIBERY & CORRUPTION MEASURES IN THEIR ORGANIZATIONS 

1. Creating company anti-corruption policy using the ISO 37001 model

Transparency and trust are the pillars upon which any organization’s credibility is built. Bribery undermines effective institutions and equitable business more than anything else, which is why businesses have to put in place preventive measures. One of such is the ISO 37001 anti-corruption control.

What is ISO 37001?

ISO 37001 is a management system standard that was published on October 15, 2016 by the International Organization for Standardization (ISO). ISO 37001 is a management system standard that was published on October 15, 2016 by the International Organization for Standardization (ISO). The standard was developed by combining compliance resources from existing organizations such as the International Chamber of Commerce, the Organization for Economic Cooperation and Development, Transparency International, and others. The standard also included guidance from leading international regulators such as the United States Department of Justice, the United States Securities and Exchange Commission, and the United Kingdom Ministry of Justice. (3rd) ISO 37001 is a globally recognized compliance standard that companies and businesses can use to model their compliance structures after. Companies typically conduct a compliance test in accordance with ISO 37001 to ensure that it meets the basic standards expected.

The ISO 37001 standard specifies anti-bribery measures and controls that represent global best practices. Companies and even governments have begun to adopt this standard since it was published in 2016; China, Singapore, Peru, Walmart, and Microsoft are among the few bodies that have obtained or are in the process of obtaining ISO 37001 certification to ensure their anti-corruption policies are effective and up to standard. 

THINGS TO KNOW ABOUT THE ISO 37001:

1. It is not the first ISO to be published, the first was in 1987- ISO 9001 Quality Management System
2. It is applicable only to bribery. It does not specifically address fraud, cartels and other anti-trust/competition violations, money-laundering, or other corrupt practices, though an organization may choose to broaden the scope of the management system to include such activities. It specifies the requirements and provides guidance for a management system designed to assist an organization in preventing, detecting, and responding to bribery, as well as complying with anti-bribery laws and voluntary commitments applicable to its activities.

3. ISO 37001:2016 requirements are generic and intended to apply to all organizations (or parts of organizations), regardless of type, size, or nature of activity, and whether in the public, private, or not-for-profit sectors.

4. ISO 37001 can be used by any organization, large or small, public, private, or non-profit, and in any country. It is a versatile tool that can be tailored to the size and nature of the organization, as well as the bribery risk it faces.

Why should organizations pursue ISO 37001 certification?

An anti-bribery policy and supporting management systems are essential components of a comprehensive compliance policy. Implementing ISO 37001 can assist organizations in avoiding the negative consequences of bribery. Meeting legal obligations and committing to sustainable and transparent business practices, aids in the development of trust and confidence among customers, suppliers, and third-party stakeholders. Finally, certification makes good business sense and allows for good profit. Microsoft Corporate Vice President and Deputy General Counsel David Howard acknowledged earlier this year in a blog post that the ‘patchwork’ of anti-bribery and corruption laws and guidance from various government and non-governmental organizations around the world makes compliance difficult. Aside from addressing the waste of spending 5% of global GDP to line the pockets of corrupt individuals and organizations, ISO 37001 certification provides tangible business benefits such as those listed below: 

1. Promotes Transparency: In the event of an investigation, it demonstrates to law enforcement that your organization has taken reasonable steps to prevent bribery. In fact, a study comparing the financial performance of companies that adopted the previous ISO 9001 certification standards to those that did not reveal significant improvements in sales growth, return on sales, and return on assets. Furthermore, it has been estimated that establishing a reputation as an ethical organization can increase stock values by 20 to 50 percent or more. Adoption of ISO 37001 is likely to provide comparable financial benefits. 

2. Establishes Credibility: Organizations that have had their reputation harmed as a result of a bribery scandal, or those based in countries where bribery and corruption are prevalent, can benefit from meeting the ISO 37001 benchmarks, which demonstrate a commitment to ethical business.

3. Creates Process Efficiencies: Improved processes and risk visibility saves time and reduces costs by eliminating inefficient or ineffective approaches.

4.  Competitive advantage: It provides a competitive advantage when certification is required in bidding processes or for supply chain onboarding.

5. Fosters Trust: It assures stakeholders, ranging from board members and investors to employees and customers, that your organization is actively engaged in bribery prevention.

Certification of compliance with this standard also adds credibility to the organization; certification is obtained through a third-party audit, is valid for three years, and is subject to yearly reviews. Important to note though that if the Law comes knocking, an ISO certification will not protect a company from prosecution.

How Brickmans Law can assist in obtaining an ISO 37001 certification?

Although the Brickmans team does not directly issue ISO 3007 certificates, it is well-versed in the requirements necessary to go through the rigorous certification process that is expected from certification firms to ensure a smooth process. We assist our clients in gaining access to the intelligence, tools, and expertise required in building and managing profitable relationships with customers, suppliers, and third-party partners. Using our efficient, agile, and cost-effective due diligence and monitoring solutions enables our customers to address critical components of the ISO 37001 anti-bribery framework, and we also assure our clients of a bespoke due diligence process through our alliance with certification agencies.

Stages of certification process we would help facilitate.

1. Pre-audit

The pre-audit is an optional audit that compares your management system to particular requirements of the standard for which certification is sought. The certifying firm issues you a report outlining its findings as well as recommended corrective steps, allowing you to assess your readiness.

2. Stage i audit

The certifying firm evaluates your readiness for a stage II audit by looking at a variety of factors, including your awareness of the standard’s requirements, the extent of your management system, and your internal audit processes.

3. Stage ii audit

Your auditor assesses your management system and delivers a full report of their findings, which may include nonconformities, observations, and chances for improvement. If there are any non-conformities, you will only have a limited period of time to remedy them.

4. Initial certification decision

After all mandatory audits have been completed, the certifying firm undertakes an unbiased evaluation of the findings before deciding whether or not to issue certification.

5. Surveillance

Surveillance audits must be undertaken at least once every calendar year, except during recertification years. Following initial certification, the first surveillance audit must take place within 12 months of the certification decision date.

6. Recertification

Every three years, thorough certification review is performed automatically to assure continuous conformance. Before the existing Certificate of Approval expires, this must be fulfilled. To avoid certification lapses, the recertification audit must be carefully planned.

7. Special Audit

Some standards necessitate an on-site “special audit” to assess the implementation and effectiveness of corrective actions for major nonconformities.

8. Suspension, Withdrawal Cancellation or Restoration of The Certificate of Approval

It’s worth noting that the certifying firm has the right to suspend, withdraw, reduce, extend, or revoke the Certificate of Approval at any moment and must provide the customer written notice. If Our firm believes such actions are required, the client will be thoroughly informed and given every opportunity to fix the situation before a final judgment is made on what action our firm should take after the notice time has expired. 

Potential clients may address essential components of the ISO 37001 anti-bribery framework using our efficient, flexible, and cost-effective due diligence and monitoring solutions. Implementing a complete compliance policy is cost-effective and, in the end, leads to increased sales. Customers, suppliers, and other stakeholders will have faith in a company that follows the law and can demonstrate that it has put in place measures to prevent infractions.

2. Establishing a comprehensive regulatory compliance matrix addressing all compliance requirements stipulated by the relevant regulators of a company’s industry

3. Processing and obtaining a SCUML (Special Control Unit-Against Money Laundering) Certificate the Special Control Unit against Money Laundering is the governmental unit which collaborates with the efforts of the Economic and Financial Crimes Commission (EFCC) in implementing Nigeria’s Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime. The SCMUL requires that certain “Designated Non-Financial Institutions” (DNFIs) carrying on business and operating in Nigeria register with the unit and obtain compliance certificate to the effect. The Oil & Gas sector was recently included under the DNFI.

4. Establishing an effective in-house due diligence process. The major benchmarks for implementing this would be:
5. Implement criteria to help analyze red signals and specify the point at which the company may walk away from a deal, backed up by a clear audit chain that reflects the decisions made and why.

2. Due diligence should be approached with a risk-based mindset. Know when to dig deeper and determine whether a potential red flag is a one-off incident or a systemic issue with the third party.

3. Recognize when it’s time to ramp up due diligence and bring in additional specialized experts, backed by a customized consulting agreement.

4. Establish a communication framework to ensure Compliance may use clear and consistent procedures when reporting potential issues to top management or requesting additional approval.

5. Make sure that everyone (employees and third parties) is aware of the personal and business ramifications of non-compliance.

6. Be cognizant of local legislation and any inherent ambiguities or interpretations in local law.
7. Is there still a risk of hurting the company’s reputation or limiting future projects in other markets if there is no perceived risk of breaking high-profile, extraterritorial UK or US anti-bribery legislation?
8. Ensure that ABC policies and procedures, as well as the tone from the top and employee training, accurately communicate the risks of allowing what may appear to be apparent commercial rewards of a large business opportunity to outweigh the regulatory and reputational risks to the company.

5. Conducting Third party due diligence:  Businesses establishing ‘appropriate procedures’ to combat bribery and corruption haven’t always treated it as a top priority. As a result, many businesses struggle to implement efficient and appropriate due diligence processes that are tailored to their markets. However, increased regulatory scrutiny of AML procedures, as well as expectations from Nigerian agencies on comprehensive anti-corruption requirements and commercial expectations from the international community, necessitate the development of a system that helps you better understand your customers, employees, and vendors in order to reduce risk, increase productivity, and improve decision-making. The Brickmans’ due diligence department can bring together all the intelligence you need in one place to conduct consistent due diligence and comply with anti-money laundering and anti-bribery regulatory requirements.

 Establishing important KYC (Know your client/customer measures):

1. Search On-going AML or other corruption related cases
2. Tax compliance search
3. Annual Returns compliance search
4. Corporate Governance Compliance 
5. Due Diligence on credibility of directors and beneficial ownership
6. Compliance with record keeping and other transparency requirements