about business partner validation
Anti-corruption due diligence: Daunting for both companies and their business partners
Large multinationals are faced with the enormous task of conducting due diligence on all their business partners, regardless of these partners’ size and countries of operation. This is particularly true of companies responding to FCPA requirements. These large companies invest a significant amount of resources to provide proof that due diligence has been adequately performed on even the smallest and least at-risk partners. Business partners, on the other hand, must frequently answer multiple questionnaires and other due diligence requests made by clients, sign anti-corruption statements, and accept anti-corruption clauses specific to each of their clients’ due diligence procedures. Business partners, particularly those with long-standing relationships with their clients, are sometimes reticent to undergo renewed due diligence checks; however, more often than not, business partners sign anti-corruption statements and accept anti-corruption clauses without so much as glancing at them. This is cause for much concern among large companies that can be held liable in the event the business partner engages in corruption. Companies must obtain assurance that their business partners recognize their client’s zero-tolerance position on corruption, understand the reasons for this position, and openly commit to respecting it.
Validation: Developed by demand from large companies and SMEs
Validation was developed by ETHIC Intelligence in 2011 as a way of facilitating due diligence checks on small and medium-sized business partners (such as sales agents or consultants) while at the same time providing business partners an advantage over their competitors in selection by potential clients. In association with World Check, SGS and DNV, ETHIC Intelligence conducts a certain level of due diligence on business partners and attributes a validation “label” that lessens the amount of due diligence large companies must perform on them. Partners voluntarily undergo validation processes in order to obtain the validation label that can improve their chances of being selected to do business by large clients; clients, on the other hand, can request that their business partners obtain validation as assurance that a certain level of due diligence has already been performed, thus lessening their due diligence burden.
Strengthening due diligence: What Validation attests to
Validation offers assurance that the following measures have been taken:
- The business partner completes a detailed, declarative questionnaire about its company (registration, JV or consortia activities, shareholders, links to government, etc.);
- Answers to the questionnaire are verified through the World Check database to determine whether the business partner is formally FCPA compliant; blacklisted companies or individuals are ineligible to continue the validation process.
- SGS or DNV conduct an on-site visit to assess the anti-corruption program of the business partner and offer technical assistance to improve it if necessary;
- If needed, awareness-raising training is carried out by SGS or DNV on why corruption is an issue and how to avoid it; codes of conduct and other compliance tools are provided to the business partner if necessary;
- The business partner’s CEO signs a letter stating the company’s commitment to banning corruption;
- Validations awarded are posted on the business partner’s and ETHIC Intelligence’s websites accompanied by the CEO commitment letter, validation terms of reference, and a “compliance risk rating” in the form of a chart indicating:
- Whether the business partner’s executive management includes a public agent or is linked to a public agent
- Whether the business partner’s shareholders or ultimate beneficiaries include a public agent or are linked to a public agent
- Whether the business partner uses subcontractors to carry out its mission
- Whether the business partner is engaged in a consortium or joint venture.
Payment and ownership of Validation results
Business partners contact ETHIC Intelligence directly to request validation and bear its full cost. In exchange, they can use validation as an additional sales argument with their clients. In asking their business partners to apply for validation, companies may also choose to cover the cost of due diligence and leave the cost of the audit and registration to the business partner. In this case, companies gain access to the detailed due diligence reports while business partners maintain ownership of their validations.
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