Export News and Regulations

Here’s What a $252 Million Rap Sheet Looks Like

The largest fine ever for export compliance violations has been given to a major oil services company – $252.6 million.

The violations were so extreme and flagrant the company managed to run afoul of two separate agencies – the Department of Commerce’s Bureau of Industry and Security (BIS) and the Department of the Treasury’s Office of Foreign Assets Control (OFAC), plus the U.S. Attorney’s Office for the Southern District of Texas (where the company was based before moving their headquarters to Switzerland).

First of all, the company had no adequate system in place to identify and stop potential violations – and that could have been intentional, considering all the purposeful violations that were going on. Not having anti-corruption controls is bad enough, but the corruption that did take place is so extreme it’s almost funny. Companies in the oil industry need to be exceptionally conscious of things like this, considering the sorts of countries they’ll typically be dealing with and the reputation for systemic corruption that many of those places have, for good reason.

The company’s actions made the U.S. Foreign Corrupt Practices Act really earn its name: “foreign corrupt practices” is the only way to refer to the millions of dollars in bribes of foreign officials throughout the Middle East and Africa, as well as exploiting the UN’s widely criticized Oil For Food Program. When this company purchased and partnered with local entities, some of which seemed not to do anything at all, solely because they were connected with relatives or associates of officials who had the power to award contracts to the company or otherwise grant them access privileges.

The company also willfully violated international sanctions by allowing their products to be exported to Cuba, Sudan, Iran and Syria. This wasn’t just a matter of individual employees failing to conduct proper restricted party screening on customers – the investigation found that managers and executives were actively engaged in organizing the illegal transactions. And they obviously believed that they could get away with it. They were very wrong.

Screening the people, entities and countries you’re dealing with for export restrictions is Export Compliance 101 – the very most basic thing that every company has to do to prevent violations. It’s hard to understand quite what the company and its employees were thinking – whether a number of individuals had just gone rogue or if this was a concerted and deliberate effort to go against United States law – but what’s for certain is that they were not taking the notion of export compliance seriously.

There’s an important lesson in this for everyone, even if you aren’t planning to bribe African officials and sell equipment illegally to Iran: violations are real, they do happen, they create threats and they are discovered and punished.

If you want to avoid violations leading to penalties, your company needs a robust export control program that can prevent violations and detect any attempt to get past them. This has to include a system for maintaining an exhaustive audit trail for recording all transactions to prove your company’s intent to comply, and a system of checks and balances, so that one hand always knows what the other is doing.