The United States Foreign Corrupt Practices Act (FCPA) (1977) and the U.K. Bribery act (UKBA) (2010) are currently the world’s widest reaching anti-bribery laws. In 2014 the US Department of Justice (DOJ) handed out corporate fines for FCPA violations averaging $156.6 million per violation, including the largest settlement in FCPA history –US$772 million– by Alstom, and criminal charges against fourteen individuals. On the other side of the pond, the UK Serious Fraud Office (SFO) obtained its first convictions under the UKBA of three directors and agents of Sustainable AgroEnergy PLC.
As part of its investigation of Panalpina, a Swiss logistics firm, the SEC and DOJ charged Shell Nigeria Exploration and Production Company Ltd. (SNEPCO), a subsidiary of Royal Dutch Shell PLC, for paying $2 million to its subcontractors, knowing that some or all of the money would be paid as bribes to Nigerian customs officials to import materials and equipment into Nigeria through Panalpina. The illegal payments were allegedly covered up in SNEPCO’s books and records, thus causing falsified entries in Royal Dutch Shell’s books and records. To settle the matter, Royal Dutch Shell and SNEPCO agreed to a three-year deferred prosecution agreement and payment of a $30 million penalty by SNEPCO. Shell International Exploration and Production, Inc. agreed to pay more than $18 million in disgorgement in prejudgment interest to the SEC for its failure to prove internal control systems were in place — totaling more than $48 million in criminal and civil sanctions.
The Royal Dutch Shell case highlights not only the need for oversight mechanisms to monitor business relationships including subsidiaries and suppliers, but also the difficulty in monitoring such extensive business relationships, which for Royal Dutch Shell’s case included regional subsidiaries and logistics suppliers. According to Transparency International corruption increases procurement costs by an estimated 25%, making the procurement of goods and services one of the greatest risks for companies to manage. As companies seek access to cheaper goods and services, through either local intermediaries or subsidiaries, companies should recognize the limits to developing anti-corruption policies.