Fighting bribery and corruption

As most people know, energy firms - including oil and gas companies - are greatly affected by geopolitical events such as changes in government, armed conflicts, and natural disasters. In addition, the industry is increasingly being impacted by global regulations, significant fines, and other challenges affecting the health of their businesses. However, the impact of bribery and corruption, and its ability to expand it into new areas of the business, is one of the greatest emerging threats facing the industry.

In addition to monitoring their own tightly-regulated actions, oil and gas companies, like their peers in other industries doing global business, are also held increasingly accountable for the conduct of their executives and staff. As part of the monitoring of global conduct, the effort to curb bribery and corruption, and remain compliant, is changing the way many oil and gas companies do business, leading them to seek out technology solutions to manage what was often relegated as an employee management issue.

Remaining compliant with myriad regulations is a full-time job. And with the increasing demands on companies to be compliant with regulations, many oil and gas companies are bulking up compliance staff. The current model for many energy firms conducting business is: organizations tap into teams of accountants, analysts and lawyers to manually review transactions, invoices and procurement data for suspicious behavior related to bribery and corruption. But this is a short term, manual solution which cannot scale. With the volume of data and the sheer complexity of today's bribery and corruption schemes, it's easier than ever for compliance teams to miss critical red flags.

As oil and gas companies increasingly turn to automation technology to address the problem of bribery and corruption, many are specifically using analytics programs to monitor for and stop these potentially illicit behaviors which can be disastrous to both the bottom line and to a firm's reputation.

Sophisticated analytics and rules have been designed to spot suspicious transactions, invoices and procurement data. These suspect activities are then flagged to teams that investigate the results of a technical analysis, which makes the entire process more efficient and productive.

These systems look for transactions that are outside of the normal flow of business. For example, ill-timed or duplicative payments, falsified invoices, and other suspicious transactions. An analytics program will scroll through all the data held in an organization's general ledger to spot these suspicious activities and flag them for analysts.

One way in which the oil and gas industry is especially exposed to the risk of bribery and corruption is in the acquisition of oil or mining licenses. During the bidding process, a local third-party agent employed by a company to secure the contract may be working behind the scenes to route bribes to officials overseeing the license. Upon the awarding of the contract, these bribes are then paid and are disguised as payments to various officials or sub-contractors.

A specialized analytics system analyzes all the transactions related to a deal and would look to identify the questionable payments using data points that include timing of the payments, types of organizations, or unusual payment behavior, such as a one-off bonus payment paid to the agent that was not agreed to prior to the deal.

THE POWER OF AI

These new analytics systems are often designed with the power of artificial intelligence (AI) at the core. These solutions can include "fast track" capabilities of prebuilt analytics developed using thousands of hours of research and experience in the field, these solutions can quickly identify some of the more common scenarios which trigger alerts. And once the organization begins submitting transactions, machine learning comes into play and begins to learn what a "normal" situation is for that particular business as it sees more data.

This high-level information is also fed back to the overall service as data scientists build more sophisticated analytics. Thus, the service allows both customized learning as well as group level learning for everyone in an organization that uses it.

Methods of evading detection continue to grow more and more sophisticated. But, a targeted analytics system takes into account decades' worth of risk scenarios, and is constantly updated with each transaction it processes and each alert it surfaces. Built on the same infrastructure that often handles the processing of more than 50 million transactions a day in its most strenuous applications, the systems designed to track bribery or other forms of corruption are often scalable to almost limitless performance.

Anti-bribery and corruption analytics are grouped into three primary areas. Travel, expense, gifts, and entertainment is the first and the primary area that organizations work with because it improves the capabilities of their existing processes. The second area that is adopting these new analytics is accounts payable, followed by accounts receivable. While the travel area is nearly always the first area to be rolled out, organizations tend to move into monitoring the accounts payable or receivable areas based on priority of risk as dictated by their specific concerns or client work.

The introduction of specialized anti-bribery and corruption technologies and systems has provided oil and gas companies with an overwhelming sense of relief. Historically, bribery and corruption has been an area underserved from a technical perspective, leaving organizations vulnerable to legal, reputational, and even criminal risk. Until now, compliance, ethics, and legal professionals have been dependent on home-grown solutions to manage their investigations and compliance requirements.

This situation was forcing them to focus on training and awareness programs because there were no analytics systems being employed to help. But now, possessing the ability to tie disparate ERP data systems together, analyzed by sophisticated analytics, as well as case management for investigations and whistleblowing protection, is a game changer for the industry.

The road ahead is full of opportunities to expand and automatic analytics used to fight bribery and corruption, with the oil and gas industry at a prime position to take full advantage of these advances. First, is the continual creation of better and faster analytics to serve the market. Anti-bribery and corruption scenarios are ever changing and companies, through their analytics, are going to have to work hard to stay ahead of the criminals.

Currently, about 50% of bribery and corruption cases are revealed by whistleblowers. However, as new solutions come online that address these findings, the clues uncovered by these whistleblowers will become easier to track and prove. Through the development of newer case management systems, these services will offer a secure and streamlined work flow to ensure that whistleblower tips are appropriately logged and reviewed. Additionally, these types of solutions will be applied to many other areas that an organization must be in compliance with, such as health and safety.

As bribery and corruption targeted analytics picks up steam in the oil and gas industry, those companies not employing these technologies may hopefully be in the overburdened minority. Importantly, these analytics will enable oil and gas companies to grow more responsibly as they move into new markets and geographies.

Today, too much business is left on the table because a geography or vertical is perceived to be too risky because of bribery or corruption concerns. Now, new technology solutions and analytics enable businesses to tackle these markets responsibly by giving centralized oversight to a company with minimal disruption to its business.

About the author

Micah Willbrand is global head of anti-bribery and corruption solutions for NICE Actimize. He works with organizations to identify ways to mitigate bribery, corruption, money laundering, and other financial crime risks. He has more than 14 years of experience in financial services and technology specific to global AML/CFT initiatives, and brings a range of experience to enable organizations to streamline customer onboarding and monitoring programs. Prior to joining Actimize, Willbrand was global director of risk at Reed Elsevier - Accuity, where he also held the positions of director of risk and payments, EMEA, and director, Financial Services Americas.