As the Ukraine conflict continues, sanctions and supply-chain disruptions have intensified shortages of key commodities, which could become a major risk factor for corruption, experts said.
US sanctions imposed in response to Russia’s recent invasion of Ukraine have created obvious short-term compliance issues for companies, but also pose potential long-term challenges.
Oil, wheat, fertilizers, neon, iron and other critical commodities are in limited supply, either directly because of sanctions or because of conflict that has disrupted supplies from Russia and Ukraine. These loopholes can cause less honest third parties and agents to pay bribes as a way to move things forward.
“The shortage causes corrupt actors to act on their instincts,” said Pam Davis, partner at law firm Winston & Strone LLP.
As with most corruption cases, the biggest risk comes from third parties whose work cannot be easily viewed as the company’s own operations, said Ms Davis, who is under the firm’s US Foreign Corrupt Practices Act. and presides over the Anti-Corruption Team. It has already started advising clients to be mindful of the impending risks, she said.
The deficit associated with the Ukraine conflict is relatively new. Kara Brockmeyer, a partner at Debevois & Plimpton LLP, which previously headed the Securities and Exchange Commission’s anti-corruption enforcement unit, said that although she has not yet advised any clients directly involved in corruption from the Ukraine-Russia conflict. Gave it, but he had to. Work for clients who may be in violation of US anti-corruption laws due to pandemic constraints.
“It takes the pressure off to make sure you’re finding stuff, that you’re getting alternative suppliers,” she said. “Those are really some pain points where we encourage our customers and their compliance officers to pay attention.”
Customs can be a particularly sensitive area. Companies or their agents may try to expedite the movement of goods through customs by bribing customs agents.
In 2010, for example, five oil-services companies and a freight forwarder settled with the SEC and the US Department of Justice to pay bribes to receive preferential treatment from customs agents in several countries. Bribery occurred as oil prices rose to their all-time high in 2008.
Weatherford International Ltd., another oil-services company, admitted to violating the FCPA in 2013 with respect to several bribes paid over the same period. Notably, Weatherford also admitted at the same time a breach of sanctions, misconduct that a top prosecutor attributed to an “anemic compliance environment.”
Brandon Daniels, president of risk and compliance company Exiger LLC, said companies may also pay bribes to help hide the origin of goods, making material subject to the sanctions block appear as if it came from a legitimate source. .
“Whenever you have a major economic blockade, you will have people trying to obscure the source of goods,” said Mr. Daniels.
He said any shortfall could also prompt companies to attempt to bribe state officials to gain access to a desired item – for example, for a state-owned mining company in times of metal shortages. officer, he said.
In 2009 several employees of mining company Rio Tinto Plc were accused of engaging in bribery in China amid a steep rise in iron ore prices.
Mr. Daniels, whose company advises on risk and supply-chain issues, said businesses should increase their monitoring of invoicing and transaction activity, look for discrepancies in new providers and perform their due diligence on third-party advisors. Should increase.
Companies’ leadership should also be aware that placing too much emphasis on delivering results to employees can cut corners, Ms Brockmeyer said.
“You can put pressure on your business to perform and put pressure on your business when things aren’t going well,” she said. “The pressure must be combined with the message ‘We want you to make sure you’re acting appropriately.'”