Key Energy last week resolved its long-standing Foreign Corrupt Practices Act (FCPA) enforcement action. It paid US$5 million in profit disgorgement under a Securities and Exchange Commission (SEC) Order having previously received a declination from the United States Justice Department (DOJ). One of the more interesting paragraphs in the Order dealt with transaction monitoring. The language of the paragraph makes clear that the SEC expects transaction monitoring to be a part of a ‘best practice’ anti-corruption compliance programme going forward.
The Order stated: “In 2012, Key Energy approved Key Mexico’s contribution of gifts totaling approximately US$118,000 to Pemex’s annual Christmas season celebration with the understanding that the gifts were to be intended for a raffle.” However, some US$55,000 of this amount was designated to some 130 specific Pemex officials, not a general donation for the benefit of all Pemex employees.
The Order went on to specify that the amount was nine times greater than the amount donated for the Christmas raffle for Pemex employees in 2010, and some 26 times the amount spent in 2011 for the same event. More interestingly, the SEC pointed out that, “Key Energy also failed to consider the implications of the explanation by Key Mexico’s country manager that the higher gift amount in 2012 was correlated to Key Mexico having done more business with Pemex that year”.
If Key Energy had engaged in such transaction monitoring, it would have seen an increase in business with Pemex, which of course could then have been further investigated. As the Order noted: “Had Key Energy sought more information, it may have learned that Key Mexico was providing gifts to Pemex officials during a period Key Mexico was engaged in ongoing negotiations with Pemex, including negotiations to obtain additional funding for work required under its contracts with Pemex.”
This transaction monitoring analysis laid out by the SEC in its Order clearly intones that the SEC will be expecting this type of monitoring going forward. This means that a chief compliance officer (CCO), or the compliance function in general, will need visibility on not only gifts, travel, entertainment and donation spends in high risk areas, but also on sales information so that it can be correlated and reviewed from the compliance perspective. This is a new level of detail that has been laid out by the SEC.