Bribery and corruption remained a prominent fixture of media headlines throughout 2016, competing with the UK referendum on membership of the European Union, the Panama Papers leaks, and the continued activity of terrorist networks.
As 2016 comes to an end, London’s Financial and Forensic Investigations practice revisits the major anti-corruption stories of the year and identifies some of the lessons that can be learned from these.
Petrobras Rumbles On, Shows No Sign of Losing Pace
As predicted at the beginning of the year, the Petrobras scandal continued to engulf Brazil and its political hierarchy and economy during 2016, with fresh allegations and plea agreements drawing increasingly high-profile companies and individuals into investigators’ crosshairs. This culminated in political upheaval in August 2016, when President Dilma Rousseff was removed from office and replaced by Michel Temer.
A further wave of upheaval appears imminent following reports that Temer and his administration (amongst other remaining politicians) were uncovered in plea bargain agreements with Brazilian authorities as the recipients of millions of dollars in illicit payments in 2014.
1MDB and the Closing of Banks
While already in full swing by the end of 2015, the scandal involving the alleged diversion of funds from Malaysia’s strategic development fund 1MDB to the country’s prime minister, Najib Razak, gathered steam in 2016.
In July, the U.S. Department of Justice (DOJ) filed complaints through which it seeks to recover more than US$1 billion laundered through the United States. These complaints target individuals connected to 1MDB and Razak, and embroil a series of financial institutions, including Goldman Sachs, that acted as advisers to 1MDB.
Singapore regulators also got tough with institutions linked with funds apparently originating from 1MDB, with the Monetary Authority of Singapore (MAS) revoking the licenses of BSI and Falcon Bank and imposing fines on DBS, UBS, Standard Chartered, and Coutts, primarily on the grounds of breaching anti-money laundering requirements and expectations.
Investigations reportedly continue into 1MDB and Razak in Switzerland, Hong Kong, the United States, Singapore, Luxembourg, the United Arab Emirates, and the Seychelles.
The penalties highlight the importance of knowing (and documenting) exactly who you are dealing with by conducting appropriate due diligence at the outset of a relationship and by ensuring relationships are monitored (with appropriate intervention when risks arise) on an ongoing basis.
Unaoil—If at First You Don’t Succeed . . .
Unaoil, the Monaco-based energy intermediary, is no stranger to allegations of bribery and corruption, having been accused of making corrupt payments in a High Court case against Singaporean engineering firm Leighton Offshore. While the court found that the evidence to support the allegations of corruption was “at best tenuous,” Unaoil found itself at the centre of an international bribery scandal in March 2016 when it was the focus of a media report describing the company as “the company that bribed the world.”
Unaoil is alleged to have acted as a facilitator of illicit payments between government officials in Yemen, Libya, Iran, Syria, UAE, Kazakhstan, and Azerbaijan, among others, for large international firms including Halliburton, Honeywell, Total, and Samsung.
The allegations sparked public investigation into Unaoil and its operations by the UK’s Serious Fraud Office (SFO), the DOJ, and the Australian Federal Police, along with other international enforcement agencies.
Working with intermediaries often represents a substantial risk to a company. While they can provide valuable contacts and expertise, a lack of transparency over business methods utilised by agents can (and does) land companies in hot water with regulators, who often don’t accept the excuse that the agent “went rogue” when it made illicit payments.
Serious Fraud Office Gets Serious
The SFO, as predicted, continued to bare its teeth in 2016, both through successful use of the additional remedial tools it has been provided with (such as the application of deferred prosecution agreements (DPAs)) and the tough line adopted by its director, David Green CB QC.
Green and his team struck a consistent tone throughout 2016, warning companies that the SFO is not in the business of telling people how not to rob a bank, and that an institution’s investigative cooperation must be immediate and absolute to even be considered for the degree of leniency afforded by a DPA. This was evidenced by Green’s refusal to apply for a DPA in the case of Sweett Group, which failed to cooperate with the SFO’s investigations to a satisfactory degree.
It is clear that any company that falls afoul of the UK Bribery Act needs to very carefully manage its relationship with the SFO and understand that incorrect decisions made at the outset of an investigation can easily harm its chances of securing a DPA going forward.
FCPA Corporate Penalties and Settlements Bounce Back
After an incredibly quiet year for corporate settlements and penalties under the U.S. Foreign Corrupt Practices Act (FCPA) in 2015, 2016—as predicted—has been a bumper year for the DOJ and the U.S. Securities and Exchange Committee (SEC).
The following household names, among others, paid large penalties during the year:
Many smaller settlements have also been made by companies facing FCPA probes such as Nortek and Akamai Technologies, apparently taking advantage of a DOJ pilot program whereby companies that voluntarily self-report, remediate, and cooperate with investigative agencies are considered for nonprosecution agreements.
6 days ago by Pathay Singh
6 days ago by Pathay Singh
6 days ago by Pathay Singh