It’s a bittersweet time for Sweett Group PLC. Despite picking up many prestigious new business contracts in recent years, the building and infrastructure project management company has been mired in a bribery scandal in relation to its activities in the Middle East.
In fact, Sweett became the first company to be convicted under Section 7 of the Bribery Act 2010. The British Serious Fraud Office (SFO) ordered the company to pay £2.25 million in fines, a confiscation order and costs. The case surrounds Sweett’s failure to prevent bribes being paid to an individual named Khaled Al Badie through a subsidiary, Cyril Sweett International. The bribery was for project management and cost consulting services in relation to the building of a luxury hotel in Dubai.
Two messages spring loud and clear from this incident. The first is that authorities like the SFO are stamping down harder than ever on bribery and corruption cases—all over the world. Corrupt companies and individuals can run from the regulations, but they can’t hide. Sweett Group was the first company to be convicted under the Bribery Act, although the authority secured its first deferred prosecution agreement last year against ICBC Standard Bank under the Bribery Act. Standard Bank picked up penalties of about $37m from both the SFO and US Securities and Exchange Commission—a reflection too of the closer multi-jurisdictional and multi-national ties between regulatory authorities.
The second message is that this corruption may well have been identified and eliminated much quicker, if the company had the appropriate corporate regulatory compliance controls in place. A tighter, more effective due diligence program on the activities of Sweett’s Cyril Sweett International subsidiary may have prevented the financial, legal and reputational harm the company now finds itself facing.
However, that compliance can be easier said than done. Every business is faced with relentless change within regulatory frameworks, rules adoption and reporting requirements. These rules and the reporting framework can also be intensely complex—the 4th EU Money Laundering Directive, Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act, for example, all demand rigorous screening and compliance from companies, adding a new layer of complexity to on-boarding of new third parties, including customers. It doesn’t end there. However much you want to comply with the regulations, you also need to balance the risk against how fast and easy it is for customers to transact with your organization. Make it too tough and they’ll go elsewhere. So how do you build a scalable, effective and proportionate program for third-party due diligence?
Verify the business entity
A robust entity verification process ensures you are working with the correct entity throughout the client lifecycle. It gives you the confidence that the business or entity you are transacting with is verified with the right level of accuracy, diligence and governance.
Establish beneficial ownership
Not everyone wants to be identified as the beneficial owner. Criminals use the opacity of corporate vehicles to hide their identity, the true purpose of the account and the source or use of funds or property associated with the corporate vehicle. However, establishing beneficial ownership is an imperative component of the compliance process. An automated beneficial ownership data collection process streamlines the data collection process, delivers the necessary transparency and ethical business growth.
Screening organizations and principals
Before working with organizations and their principals, you need to conduct a rigorous, risk-based screening process. Consider a solution that can analyze the risk of these entities against global databases of adverse media, sanctions and watch lists, Politically Exposed Persons (PEPs) and their close associates, as well as litigation and open source information. Fighting corruption and money laundering has never been more difficult. The penalties for non-compliance have never been so severe. In this new era, the right governance and controls can help ensure that we can confidently say this business is who they say they are, are located why they say they are and are engaged in the type of business they say they do.
A solution that blends business data, screening services including PEPs, global watch lists and high risk and emerging market intelligence streamlines the client verification process, ensures compliance and frees up staff time to concentrate on more complicated aspects of the day-to-day compliance function.
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