Bill Waite on Unaoil: Certification versus Investigation
Wednesday, April 13, 2016 at 9:18AM
Bill Waite in Due Diligence, Hui Chen, Investigations, Trace, Unaoil

I have not had sight of the TRACE reports into Unaoil but no doubt in time they will become public. I am confident that TRACE did what it was contracted to do and exercised skill and care in so doing. It is a professional organization.

Unfortunately, however, its certification process is not and could not be expected to identify what appears to have been inherent corruption within Unaoil. Checking public records, receiving “helpful” responses from the company's officers and employees and taking up references which the target organisation provides is not particularly penetrating or incisive. It is meant to check details provided by the target and confirm their accuracy or otherwise.

Such a process may have a place in a risk management program particularly in environments which are data rich and where the data is inherently reliable, and where the third party with whom the client is intending to contract is low risk. That cannot be said of Unaoil and nor can it be said of the environments in which it operated.    

What is apparent from the media reports into Unaoil is not a failure of TRACE, but a failure of the risk management process which identified a certification process as the right risk mitigation tool to deploy. Unaoil was after all an intermediary used to secure contracts, was paid on a commission, and operated in war-torn States with either weak or non existent governance processes. It is somewhat difficult to conceive of a relationship which required more vigorous attention.

Last year Hui Chen was appointed by the Department of Justice to assist its prosecutors review and opine on the effectiveness, or otherwise, of corporate compliance programs. Unaoil is a poster child for her mandate. 

But it is not, with respect to TRACE, right to suggest that in order to identify significant regulatory risk one has to have access to the internal communications of the target  organisation.

For those that had the mandate -- and, critically, the appropriate resources to look -- there was much that could be found about Unaoil from human intelligence sources and other materials which would cause any discerning corporation to decline what Unaoil had to offer.


Bill Waite is a contributing editor of the FCPA Blog. He's one of the founders of The Risk Advisory Group, established in 1997 with the objective of building Europe’s leading independent risk management consultancy. He serves as the group’s CEO and general counsel. He formerly practiced as a criminal barrister before joining the U.K. Serious Fraud Office in 1991 as a prosecutor. He can be contacted here.

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