I received an order for almost $1 million of grenades from a Caribbean Island — as I recall, it was Antigua. You don’t need to be an auditor to know that doesn’t look right.
I was working then for a large defense contractor. The sales rep for the region rushed into my office and tossed the purchase order on my desk.
A million dollars for riot control grenades was a big order, especially for a country with no internal or external public safety threats, aside from the occasional rowdy tourist. And the order was almost full list price, where a discount would have been the standard practice.
When I saw that order, did I think about how that million dollars might be better used in education or healthcare? No, all I saw was a very profitable sale.
My reaction was all fist bumps and high fives with the sales rep. I wasn’t thinking about what Katherine Dixon (Director TI, Defense and Security) has described as the “theft of national budgets.”
Months after that order was placed and shipped, I read how the outgoing head of state there was accused of using contracts and procurements to pad his pension prior to leaving office.
I didn’t share that news with anyone or publicly link it with our million-dollar grenade order. But I knew for certain the purchase order wasn’t suited to the market. In other words, my gut told me it didn’t look right.
That purchase order came to mind this month when the Unaoil story broke. On CNBC, I described Unaoil as “wrapped in risk.”
There’s no substitute for personal judgment in compliance. Looking at a third party or a transaction, we should always ask ourselves if it looks right.
I don’t know any of the Unaoil details other than what’s been reported. But a company lodged in one tax haven and incorporated in another triggers obvious concerns on the basis of atmospherics. It’s a feeling in the gut.
You don’t pick that up in a transactional audit. But it only takes one person, from compliance, legal, finance, HR, or anywhere, to hit the pause button and say out loud, “This looks bad.”
I often wonder if we are so deep in analytics, certifications, and processes that we’re overlooking the greatest asset for compliance that we all have — our intuition.
Bill Waite said in a post for the FCPA Blog, referring to Unaoil, “It is somewhat difficult to conceive of a relationship which required more vigorous attention.”
Agreed, and there are multiple players in most legal, audit, and compliance organizations who have the authority to look at a third-party relationship and hit the pause button, and even to decline the onboarding of an agent or reject an order.
Sometimes (many times) that’s going to upset the commercial and business teams, as messing up a good piece of business. But let’s face it, no one goes to jail or ends up in an enforcement action for saying “no” to a deal that doesn’t feel right in the gut.
So here’s my advice, learned the hard way (I did go to jail, after all). Save your celebration for the next time you read about an intermediary who’s making news for the wrong reasons, and who someone in your organization had the guts to say “no thanks” to doing business with.
Richard Bistrong is a contributing editor of the FCPA Blog and CEO of Front-Line Anti-Bribery LLC. He was named one of Ethisphere’s 100 Most Influential in Business Ethics for 2015. He consults, writes and speaks about compliance issues. He can be contacted by email here and on twitter @richardbistrong.