Under the MACC Act 2009, commercial organisations (“CO”) and/ or individuals in position of managing the CO's affairs can be held liable for bribes or other acts of corruption carried out by persons associated with the CO in order to obtain or retain business or other improper advantage while conducting business for the CO.
In this series, we learn to identify third parties who are associated with commercial organisations (“Third Parties”) whose nature of business may potentially raise Red Flags that are indicative of bribery, money laundering, funding of terrorism and other illicit dealings. Red Flags tend to be unearthed superficially from your interactions with Third Parties and supplemented by the performance of formal due diligence prior to engaging them for service.
Such Red Flags can be read off from a combination of a Third Party's:
Relations with high-risk third parties (being government officials, their family members & close associates and politically-exposed persons, their family members & close associates)
insisting to deal with high-risk third parties with the CO staying in the shadows
making frequent political contributions, donations, sponsorships, lavish gifts & hospitality to high-risk third parties
presently or formerly in the capacity as high-risk third parties acting as an intermediary between the CO & the Office they represent(ed)
Third Party ownership whose major shareholders consist of high-risk third parties
suggesting their close relations with high-risk third parties will ensure business success for a named price
Illusive reputation
not possessing the actual qualifications, expertise, skills, experience, resources, facilities & employees to perform the services/ supply the products
the use of layers of intermediary parties
information provided of the business or business owners are not verifiable
compelling that an otherwise illegal conduct is the norm in doing business
having a history of criminal or civil enforcement actions or allegations or investigations on unethical or improper conducts
refusing to be onboarded to due diligence exercises
refusing to attest to anti-bribery/ anti-money laundering/ other regulatory undertakings
refusing to enter into written contracts
refusing to include anti-bribery/ anti-money laundering/ other similar regulation and audit clauses in contracts
Unusual payment schemes
demanding excessive commissions, success fees or rewards
predisposed to offering facilitation payments to get things done
advising payment tranches into off-shore bank accounts or bank accounts not belonging to the Third Party
insisting on payment in cash only or other financial benefits
issuing invoices that have vague description of the services/ products provided or that do not match delivery acceptance documents
refusing to issue official receipts upon payments received
Due diligence, a risk-based approach to assessing, reviewing and evaluating a Third Party's integrity, becomes a prerequisite and avails as part of adequate procedures to prevent corruption. Depending on the types of Third Parties and materiality of the Red Flags read off of a due diligence, CO can address the situation, either to carry on with the Third Party under a conditional agreement that the CO's all-encompassing anti-bribery/ anti-corruption stance is to be observed or not to move forward with the Third Party.
For further resources on building a third party due diligence policy, do look into Adequate Procedures - Third Party Due Diligence, download AMSC's free guide below or contact AMSC for a free consultation.
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