Due Diligence

Changes in regulations globally mean that it is essential for oil companies to know about the people they are doing business with. Winning contracts in many developing countries can expose companies to allegations of bribery and money laundering and there is a need to show care before entering certain business relationships, especially if government officials are part of the process. The same applies in trading transactions; companies need to know about their risk exposure to counter-parties.

The penalties for paying government officials are becoming severe and directors personally liable to criminal proceedings. Gone are the days when such costs could be deducted against tax in some European countries. The US Foreign Corrupt Practices Act, Japan's Unfair Competition Prevention Law and the UK's FSMA provisions under the 2001 Anti-Terrorism Act make it a criminal offence for individuals to make personal payments to the officials of foreign governments.

Quite often companies looking to invest in some foreign countries are unaware of the connections that are involved in a particular transaction. The counter-party may be merely a front for other individuals associated with members of the government or national oil company. Equally, there could be money laundering implications. A counter-party may be looking for an exit from a particular position. It has been estimated that money laundering counts for 5% of all financial flows.

Apart from concerns about corruption, companies also have a need to carry out due diligence investigations and background checks to judge the ability of business contracts to perform. Quite often claims made by business contacts do not check out.

Clearwater can offer unrivalled help in matters of due diligence and performance relating to the oil industry. The company has an international network of contacts within the oil industry as well as government departments concerned with oil and minerals. It has an extensive archive of its own and can run both searches on individuals and companies. It can also take discreet business references from the business associates of those subject to a due diligence report.