Dow Jones State of anti-corruption compliance Survey 2011 has shown that more than half of international companies delayed or avoided working with global business partners because of concerns about corruption. Due diligence is a vital tool used by international businesses in the prevention and discovery of corruption and several attributes go into an external investigation. African businesses wanting to attract investors must ensure that the following elements do not raise red flags:
Reputational Compliance
1. Watchlist review: These lists were initially prepared to capture known or suspected money-launderers and used by banks to stop fraudulent transactions. In more recent years these lists have been significantly expanded to include various terrorist organisations and persons suspected of engaging in international crime. Following the lead of the U.S. Government, almost every country in the world has now developed their own lists.
2.Corporate registry records: Corporate registry search with the relevant regulatory authority provides information that can then be used to conduct watchlist searches and media analysis. In addition, the corporate registry often gives details on any company name changes (sometimes was done to avoid regulatory restrictions), financial data, information on related parties, subsidiaries and other partnering companies.
3. Politically exposed persons :This information is important as to ascertain whether the particular channel partner is connected to a government or a government official in some way, and that extra review, controls or due diligence should be carried out.
4. Litigation records : The litigation history of a partner is an important as it can reveal whether or not the company has been engaged in contract disputes with vendors, disputes with banks or other financial institutions or illegal conduct or enforcement proceedings from regulators.
5. Character assessment / reputation testing: Character assessment on the company and the key individuals is the norm in most due diligence investigations who run it. This assessment is generally done by asking questions in the industry to gauge their overall reputation for integrity.
6.Media analysis : Media analysis determines the profile of a company or an individual. The media review is conducted in both English and local languages.
7. Reverse director searches: These searches take the directors that are listed in the company’s corporate registry information, and conduct reverse director searches against their names and ID numbers in search for information to see what other companies’ directors are or have been involved with. This helps to unearth any side of companies and associated entities that the directors may be or have been involved
8. Site visits: Site visits are generally conducted at the location where the company has listed as their general business office, or operating address . This determines whether the company actually exists at the given location and reveal the following information:Whether the office is in a residential location, the nature and size of the location,the quality of the surroundings, neighbourhood and fixtures and fittings to name just a few. It is common in site visits to take between 5 to 10 photographs of locations and surroundings.
9. Review of policies and procedures: An assessment of the company’s policies and procedures on governance and compliance is also looked at .These documents are often included in the investor relations or corporate governance section of the company’s website. This information can be useful for the due diligence vendor to make an assessment on whether they take compliance and governance seriously.
10. Contacting embassies : Some governments advise businesses conducting due diligence to contact the local US embassy in the
country to see if there is any debarment listed against a particular local firm.
11. Financial data:Financial data is often gathered as part of a due diligence process.It is helpful to have these audited on an annual basis to assist with verification.
The above points go into an external due diligence done on any potential African business partner. Knowing the information and ensuring that it is accurate and verifiable goes a long way to not only establishing trust in a relationship but demonstrating that African businesses take compliance seriously.
