Due Diligence: Compliance with international anti-corruption legislation

Due diligence is necessary for companies to ensure compliance with international anti-corruption legislation. Implementing tools and procedures can help simplify the process of doing business.

Due diligence tools can be used for different types of third parties and in the public procurement process. These tools and procedures work together with the country profiles, local information networks and your company's anti-corruption strategy to help mitigate corruption risks. 

Capture key data - Collect key organizational information on the entity and the department that initiates due diligence. If you capture your key data correctly, you’ll not only fill in your compliance data holes; you’ll be able to identify and mitigate risks before they become a problem.

To this end, creating automatic alerts is a key time-saving and organizational feature of successful data aggregation – use your own tools or a third party!

Identify the type of third party you are engaging - Third parties present a higher risk because they are subject to a lower-degree of control compared to employees. Yet companies are held liable for corruption committed by third parties, like:

* sales agents

* event agencies

* global suppliers

* customs clearing agent

* service provider

* joint venture partners

* customers

* contractors and sub-contractors.

Assess third party risk internally - After all of your data has been authorized, the initial risk of the relationship between the company and a third party should be evaluated by asking the entity or department initiating the business a number of relationship questions via a questionnaire.

A set of “red flag” questions ensures the risk questionnaire can be used to create guidelines for the depth of an investigation that will be conducted on a third party, and will determine the initial risk level of a specific third party to an organization.

At this stage, a third party should be subjected to background checks. Third parties should vetted against an internet database or against other available sources. Background check findings for evidential purposes are crucial. An internal or third-party management solution can help you update your system of record automatically, saving time.

* Conduct External Due Diligence (the Integrity Initiative Inc. can assist you)

* Risk Score Calculation: The risk score of a third party (Low, Medium, High) determines the minimum required scope of due diligence that must be conducted through a set of questions in the due diligence questionnaire.

* External due diligence questionnaire: Assign and send an external questionnaire to the third party. In the questionnaire, the third party will be asked to confirm or provide more information about its business activities. It should include information that may have previously been kept on file as well as external information that was obtained from independent sources.

Once the third party has completed the due diligence questionnaire, adjust your risk score to accommodate for their responses. Then, a compliance reviewer must make the determination of whether the third party will be approved or rejected after review is complete. (Note: the employee championing a partnership with a third party should not be the only reviewer or final decision-maker).

Finalize: Post-Approval Phase & Contract

After the final approval of the due diligence process, a business relationship with the third party can now be established. Additional information on the transaction or contractual details should be registered and stored alongside the rest of the partner’s due diligence information.

Not surprisingly, some companies question whether or not they should invest in a full-fledged compliance / due diligence program. However, while the return on investment is not always obvious, a strong program can help your company avoid fines and legal expenses.