Using AI and Targeted Analytics to Fight Corruption Enables Business Growth for Energy Sector
September 15th, 2017
Energy firms – including oil and gas companies – are greatly affected by geopolitical events such as changes in government, armed conflicts and natural disasters. However, the impact of bribery and corruption, and its ability to expand it into new areas of the business, is one of the greatest emerging threats facing the industry.
In addition to monitoring their own tightly-regulated actions, oil and gas companies doing global business, are also held increasingly accountable for the conduct of their executives and staff. To curb bribery and corruption, and remain compliant, companies in this sector are seeking out new technology solutions to manage what was often relegated as an employee management issue.
With the increasing regulatory demands, many oil and gas companies are bulking up compliance staff. The current model for many energy firms conducting business is: organizations tap into teams of accountants, analysts and lawyers to manually review transactions, invoices and procurement data for suspicious behavior related to bribery and corruption. But this has proven to be a short term, manual solution which cannot scale. With the volume of data and the sheer complexity of today’s bribery and corruption schemes, it’s easier than ever for compliance teams to miss critical red flags.
As oil and gas companies increasingly turn to automation technology to address the problem of bribery and corruption, many are specifically using analytics programs to monitor for and stop potentially illicit behaviors which can be disastrous to both the bottom line and to a firm’s reputation.
These automated systems look for transactions that are outside of the normal flow of business. For example, ill-timed or duplicative payments, falsified invoices, and other suspicious transactions. An analytics program will scroll through all the data held in an organization’s general ledger to spot these suspicious activities and flag them for analysts.
One way in which the oil and gas industry is especially exposed to the risk of bribery and corruption is in the acquisition of oil or mining licenses. During the bidding process, a local third party agent employed by a company to secure the contract may be working behind the scenes to route bribes to officials overseeing the license. Upon the awarding of the contract, these bribes are then paid and are disguised as payments to various officials or sub-contractors.
A specialized analytics system would analyze all the transactions related to a deal and then look to identify the questionable payments using data points that include timing of the payments, types of organizations, or unusual payment behavior, such as a one-off bonus payment paid to the agent that was not agreed to prior to the deal.
The Power of AI
These new analytics systems are often designed with the power of artificial intelligence (AI) at the core. These solutions can include “fast track” capabilities of prebuilt analytics developed using thousands of hours of research and experience in the field, these solutions can quickly identify some of the more common scenarios which trigger alerts. And once the organization begins submitting transactions, machine learning comes into play and begins to learn what a “normal” situation is for that particular business as it sees more data.
This high-level information is also fed back to the overall service as data scientists build more sophisticated analytics. Thus the service allows both customized learning as well as group level learning for everyone in an organization that uses it.
Methods of evading detection continue to grow more and more sophisticated. But, a targeted analytics system takes into account decades’ worth of risk scenarios, and is constantly updated with each transaction it processes and each alert it surfaces. Built on the same infrastructure that often handles the processing of more than 50 million transactions a day in its most strenuous applications, the systems designed to track bribery or other forms of corruption are often scalable to almost limitless performance.
The introduction of specialized anti-bribery and corruption technologies and systems has provided oil and gas companies with an overwhelming sense of relief. Historically, bribery and corruption has been an area underserved from a technical perspective, leaving organizations quite vulnerable to legal, reputational and even criminal risk.
This situation often forced companies to focus on training and awareness programs because there were no analytics systems being employed to help. But now, possessing the ability to tie disparate ERP data systems together, analyzed by sophisticated analytics, as well as case management for investigations and whistleblowing protection, is a game changer for the industry.
Currently, about 50% of bribery and corruption cases are revealed by whistleblowers. However, as new solutions come online that address these findings, the clues uncovered by these whistleblowers will become easier to track and prove. Through the development of newer case management systems, these services will offer a secure and streamlined work flow to ensure that whistleblower tips are appropriately logged and reviewed. Additionally, these types of solutions will be applied to many other areas that an organization must be in compliance with, such as health and safety.
As bribery and corruption targeted analytics picks up steam in the oil and gas industry, these analytics will enable oil and gas companies to grow more responsibly as they move into new markets and geographies.
Today, business is often left on the table because a geography or vertical is perceived to be too risky because of bribery or corruption concerns. Now, new technology solutions and analytics enable businesses to tackle these markets responsibly by giving centralized oversight to a company with minimal disruption to its business.