Hah – I bet you thought this post was going to be about metaphorical oiling, i.e. bribery. But it’s not: it’s about literal oiling, i.e. the oil industry. A while ago I read a very thought-provoking book called “Crude World: The Violent Twilight of Oil” by Peter Maass. It dealt with all aspects of the oil business, from pollution to corruption, and of course I focussed on the financial side of things. You have only to look at the example of the Sassou-Nguesso family in Congo-Brazzaville to see how the trade in oil can be used as a source of bribes, and then as a conduit and a cover for the laundering of the proceeds of corruption and other crimes. And yet, despite all we know about the extent of corruption in nations like Congo-Brazzaville, the worldwide appetite for oil is such that the large companies will continue to do business with such jurisdictions. One possible approach is to make these companies think twice about the payments they make and the relationships they foster by requiring them to do similar due diligence checks to those already undertaken by many businesses – banks, law firms, accountancy firms, investments houses, trust and company service providers and more.
As I said in my last post, on extending the AML regime to high value dealers in services, the problem lies not in the logic, but in the practicalities. If we decide that multinational oil companies and construction businesses and shipping firms, for instance, should be required to make AML checks, who will supervise them? Who will check that they are making defensible risk-based decisions, and designing adequate and proportionate AML procedures, and then applying them consistently, and revisiting it all on a regular basis to see that it still works? Would a self-regulating code of conduct be at all possible, or does shareholder pressure mean that any attempt to do more than the absolute minimum (whereby, I imagine, any checks done on counterparties focus almost entirely on payment and credit risk) would be commercial suicide?
A great thought provoking entry. Like you say, most of us would agree with the logic and principles behind AML efforts but it becomes a bit more uncomfortable when we realise that applying these principles in certain areas could immediately result in supply problems and or increased costs for one of the day to day essentials of modern life …… (and, just for clarification, we’re not talking chocolate biscuits here !!).
Yes: it is easy to have high principles when it’s a matter of logic only, and not something that affects us (or our wallets) personally! And don’t even joke about chocolate biscuits – I live in fear of a worldwide cocoa shortage one day.
Best wishes from Susan