Doing Business in the Badlands – PART 3

by | Jun 12, 2018 | Advice

In the concluding part of our series, we advise how to deal with corruption lawfully, in countries where a backhander is customary.

It is possible to cope with corruption by understanding the political situation in the target country and operating accordingly.

How do you conduct business there? Very carefully, of course. Compliance means the implementation of policies that prohibit payments that are customary in the country, but actual forbidden by law. If companies are to enforce such policies, having a local legal advisor to vet third parties and comply with the law is most useful. Such representation is extremely valuable if a dispute occurs. Litigation can be lengthy, unpredictable, and frustrating.

If you seek to enter an emerging market, take Proelium Law with you. The rules for doing business in high-risk jurisdictions are never the same.

Government officials are occasionally underpaid, and sometimes corrupt; tactics for dealing with them can depend upon:

  • Building Strong Local Representation

Protect against ethical dilemmas, by being clear that any requests for ‘political contributions’, commissions and the like would be referred back to the board for approval.

  • Compete Ethically

The supply of products and expertise that can help emerging economies develop is limited. Deploy your business not simply where markets are attractive but also where business can be done in an ethical manner.

  • Transparency

Paying full taxes and being transparent is a radical approach that government officials may not be used to. Openly illustrating the revenue being generated and how much is being driven back into the local economy is a positive action in creating security.

  • Dealing with Locals

Business in many developing economies can be done one tribe or village at a time. Manage business transactions ethically, fund communities, not overlords.

  • Dealing with Customs

Because it will be necessary to import equipment into developing economies, it is easy for customs to hold company property to ransom for under-the-table payments. The ethical solution is to let it wait! Typically, a corrupt customs official will clear the shipment when it is discovered that the company will not pay, to free space for other incoming shipments that might be lucrative. Letting it wait, often does not mean waiting very long. Alternatively, if local security permits, create a media event, and invite local officials and the press.

Managing ethically is under the control of local partners and managers. Building ethical teams is never a trivial task.

Barry ET Harris MBE is a consultant for Proelium Law LLP.  He is also a British Army veteran who combines operational experience with extensive commercial consulting, executive, and management expertise gained in complex environments and high-risk jurisdictions worldwide.

If you seek to enter an emerging market, take Proelium Law with you. The rules for doing business in high-risk jurisdictions are never the same. For a no-obligation discussion please contact us at law@proeliumlaw.com or call us 020 3875 7422.

 

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Anti Money Laundering and Counter Terrorist Financing are two subjects often linked but misunderstood.

Some quick distinctions to understand - the activity of money laundering is where cash raised from criminal activities is made to look legitimate and re-used in the financial system.

The activity of terrorist financing is less focused on the source of the funds, but interested in what those funds are used for.

The Anti-Money Laundering (AML) and Counter Terrorist Financing (CTF) legislation is important to your business, particularly if your business is engaged in legitimate activities in overseas or high risk jurisdictions. In the UK for instance you need to establish if Money Laundering Regulations apply to your business or not. See here for guidance.

Importantly, on 10th January 2020, new legislation was enacted in UK in the form of the 5th EU AML Directive. Amongst other areas, brings cyptocurrency into the purview of legislation and places obligations on business owners to make checks in respect of identifying beneficial owners and when enhanced due diligence is required. For the legislation click here. For a easier to understand guide click here.

What do I need to do ?

Making sure you know the source of any funds and where any funds you are giving out are going, is very important. Ensure you have a due diligence process in place if you are engaging with local suppliers and check the backgrounds of locally employed staff. You can only do so much to ensure you don't fall foul of the legislation but remember - the UK legislation has extra territorial reach, which means as a UK firm operating in a foreign country, you could still be prosecuted for offences under the legislation in UK. See here for guidance

The issues raised here may seem somewhat off putting for you to even engage in business. Ensuring you comply with the requirements (or at least establishing whether you need to) and then implementing systems to do so, will be a huge boost to your company management systems.

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