Home – Is Your Due-Diligence Process on Automatic Pilot?

Is Your Due-Diligence Process on Automatic Pilot?

Posted on 02-24-2016 by Ulyana Androsova

 Cruise control comes in handy, especially when you’re hitting the road for an extended trip—for business or pleasure. Yet, as much as you appreciate the ability maintain a consistent speed on a straight-away, you still have to remain alert to your surroundings—the weather, the traffic and signs posted along the road. The same is true for conducting due diligence. You can develop processes that make it easier to stay on the right compliance track, but you can’t let down your guard. 

 Watch Out for Warning Signs

Would you use cruise control if you saw a warning sign that said ‘Dangerous Curves Ahead’? Probably not. Common sense dictates that you need more control so that you can respond proactively. Likewise, on-going monitoring is crucial to an effective due-diligence strategy, ensuring that you’re able to manage third-party risks before they cause a financial, legal or reputational crash. What should you be looking for?


Our eBook on mitigating third-party risk explores a number of warning signs, including political risks. Just look at the announcement by the Securities and Exchange Commission (SEC) last summer. In a settlement agreement, BNY Mellon agreed to pay nearly $15 million over student internships. In a statement at the time, Andrew J. Ceresney, Director of the SEC Enforcement Division, said, “The FCPA prohibits companies from improperly influencing foreign officials with ‘anything of value,’ and therefore cash payments, gifts, internships, or anything else used in corrupt attempts to win business can expose companies to an SEC enforcement action.” He went on to say that “BNY Mellon deserved significant sanction…” for offering internships to family members of foreign government officials. The problem wasn’t the internships themselves, but the fact that BNY Mellon ignored its own rigorous standards for intern selection in order to curry favor with goverment officials affiliated with a Middle Eastern sovereign wealth fund.


Keep Up with the Rules of the Road

In 2011, the World Bank released a report indicating that 70 percent of big corruption cases over the last 30 years had involved anonymous shell companies. As a result, demands for transparency have climbed. As a result, the UK accelerated adoption of a beneficial ownership disclosure rule last year. Such rules can help financial services companies better understand who they are doing business with and thereby mitigate risk exposure due to others’ bad actions.  But you have to know the rules, to abide by them. When it comes to anti-bribery and corruption, regulatory landscape is complex, particularly for companies conducting business across national borders. The U.S. Foreign Corrupt Practices Act (FCPA), the UK Bribery Act and a host of other laws implemented by the 182 countries that have signed the United Nations Convention against Corruption ensure that compliance professionals have their work cut out for them. Are your tools up to the task?


3 Ways to Apply This Information Now

  1. Get your copy of the eBook, A Better Route to Mitigating Third-Party Risk: Third-Party Due Diligence for Financial Services to find out more about warning signs of compliance risk.
  2. Request a free trial of Lexis Diligence® to see how this tool can improve visibility into risk.
  3. Share this blog on LinkedIn to keep the dialogue going with your colleagues and contacts. 



Posted on : 18 Apr 2016 12:18 PM

Every little bit helps.

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