Financial Crime World

Government Contracts: Fraudulent Practices May Result in 10-Year Imprisonment

The Omani government has taken a significant step to curb fraudulent practices in the procurement of government contracts by introducing harsh penalties, including imprisonment for up to 10 years.

Fraudulent Practices in Government Contracts

According to Article 220 of the Penal Code, obtaining illegitimate benefits based on government contracts is a criminal offense. This includes:

  • Public officials
  • Third parties, such as:
    • Sub-contractors
    • Agents
    • Consultants
  • Obtaining commissions, profits, or benefits from government contracts

Penalties for Fraudulent Practices

Article 221 penalizes fraud in the performance of government contracts with imprisonment for a term of:

  • Not less than three years and not more than five years

The Penal Code also introduces restitution as a legal obligation, requiring offenders to compensate the government entity for any losses caused by their actions. This is aimed at preventing fraudulent practices that can lead to financial losses and reputational damage.

Combating Bribery

Corruption is a major concern in Oman, with bribes often resulting in funds being diverted from legitimate businesses to organized crime groups. The new Penal Code includes anti-corruption provisions that:

  • Criminalize seeking and accepting bribes
  • Criminalize offering bribes to public officials
  • Emphasize the importance of understanding the intent behind gifts or hospitality offered

Consequences for Companies

Companies operating in Oman are at risk of facing criminal penalties and fines under the new Penal Code. To mitigate this risk:

  • Conduct due diligence on external representatives and sub-contractors
  • Extend compliance policies to cover external parties
  • Retain the right to conduct audits in contracting parties’ organizations

Transnational Organized Crime

The new Penal Code includes a separate chapter dedicated to transnational organized crime, which aims to prevent organized criminal groups from establishing themselves in Oman. Participation in such groups can result in:

  • Imprisonment for five to 10 years
  • Companies found guilty of participating in their activities may face fines and dissolution

Significance for International Business

As the amended provisions are still being tried before courts, it is essential for international businesses operating in Oman to understand the risk of involvement in transnational organized crime through employees or external representatives. To mitigate this risk:

  • Implement proper compliance policies
  • Ensure transparency
  • Maintain accurate documentation

In conclusion, the upgraded Penal Code provides an opportunity for all businesses operating in Oman to review and update their compliance policies, conduct training sessions, and review third-party agreements to prevent and detect financial crimes and non-compliance related issues.