1 Buyer Beware: Do an Integrity
Check Before Conducting Business
in the Middle East
By Habib Khan, LLM
6 Silverbird Group — An Inside
Perspective on Doing Business in Africa
By Scott Appleton
9 Sub-Saharan Africa —
Ahead of the Economic Curve
By Charles Robertson
11 Data Privacy in a PRISMed World:
The Corporate Counsel’s
Perspective From Finland
By Jeremy Otis and Hannes Saarinen
a special supplement to ACC Docket
sponsored by Corporate Research and Investigations, LLC
Buyer Beware: Do an Integrity
Check Before Conducting Business
in the Middle East
By Habib Khan, LLM ([email protected]), Corporate Research and Investigations LLC
It’s a proven fact that what may seem
like gold in the international business
arena could quickly turn to rust if all
the parties involved are not properly
vetted. Here’s a case in point:
An investor in the United States was
interested in purchasing a major jewelry operation headquartered in Dubai. The jewelry
business painted a rosy picture of itself on
paper as one of the region’s most profitable
companies, and this attracted the eye of the
US investor. But an intensive due diligence
investigation conducted by a professional
background screening company based in
Dubai and retained by the US investor told
another story. The examination unearthed
numerous red flags that portrayed the jewelry
business as not only a risky investment but
also a potential liability.
In the course of the investigation, which
involved international public records searches
and local hands-on interviews to look into the
financial liabilities of the jewelry operation’s
directors and primary shareholders, it was
discovered that the jewelry company was in
the midst of liquidation proceedings, a major
factor not previously disclosed to the potential
buyer. Further research conducted at a local
level revealed that the company’s principals
were involved in several bankruptcy cases,
and that the company had been issued warnings by local regulatory agencies concerning a
host of collusive business activities.
Because these discoveries would have
been nearly impossible to uncover using
conventional internet-based search methods,
the potential buyer stood to lose his entire
investment had it not been for the business
background investigation conducted by the
screening firm.
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at [email protected].
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BUYER BEWARE: DO AN INTEGRITY CHECK BEFORE CONDUCTING BUSINESS IN THE MIDDLE EAST
It has become increasingly easy for both
small and large organizations to open up international business channels and source business
operations worldwide. One area of increasing
influence is the Middle East, particularly in the
Gulf region. Countries such as Saudi Arabia,
Abu Dhabi, Bahrain and the United Arab
Emirates have become inviting markets, enticing US, UK and European-based businesses
with strong currencies, reduced barriers to
entry and lucrative opportunities.
While those opportunities can prove to be
beneficial to companies seeking to broaden
global markets, they can also open the doors
to predatory or other unscrupulous business
practices orchestrated by scammers who prey
on otherwise legitimate organizations, while
creating legal headaches and wreaking havoc
for those companies down the road.
With that threat in mind, it’s imperative that
organizations involved in global business dealings establish a comprehensive risk management program that incorporates international
background investigations, preferably conducted by a screening company not only experienced in due diligence but also highly familiar
with the specific laws and cultural terrain of the
target country in which the potential business
is being conducted.
Doing business in the Middle East
Most expatriate business professionals in
the Middle East advise anyone contemplating expanding their business in this market
to remember that it’s not what you know, but
whom you know. Therefore, a good investment
in time and effort to understand the social
and business culture across the Gulf region is
essential to long-term business success. Being
well versed in such areas as business etiquette,
meeting protocol and negotiation techniques
is crucial to properly establishing business
partnerships that transcend stereotypes and
improve communications.
It’s the “whom you know” part of the equation that dictates the need for a thorough risk
management program, which begins with a
scrutinized understanding of the individuals
and organizations with whom you’re conducting business. In this environment, it is
essential that businesses become completely
familiar with the operations of international
a special supplement of ACC Docket3
BUYER BEWARE: DO AN INTEGRITY CHECK BEFORE CONDUCTING BUSINESS IN THE MIDDLE EAST
clients, business partners, distributors, agents,
consultants and individuals before conducting
offshore transactions, establishing formal corporate partnerships or committing to international investments.
Part of the risk management arsenal includes
a business partner integrity check that should
be conducted before dealing with businesses or
governmental organizations involving:
• securing a pre-merger, acquisition or pre-IPO
transactions;
• entering into any newly formed joint venture;
• engaging in new banking or business
relationships;
• employing, contracting or retaining a foreign
business partner; or
• reviewing regulatory compliance or corporate
governance best practices.
While extensive in scope, this due diligence
process requires a boots-on-the-ground team to
ensure that no stone is left unturned. Unfortunately, most US-based screening and investiga4
EMEA BRIEFINGS JUNE 2014
tions firms lack the wherewithal to properly
conduct overseas searches. And when it comes
to the Middle East — where a vast majority of jurisdictions lack the technology that makes online
records searches globally obtainable — proper
vetting of individuals, directors, shareholders
(especially those connected to ruling families),
companies and governing bodies can only be
achieved through in-person interviews, access to
local records and discussions with sources who
are personally knowledgeable with the subject
being investigated.
Because of the shear remoteness of various regions in the Middle East, the inherent
risk of becoming involved with individuals or
organizations that regularly take part in corruption, organized crime, terrorist financing or
money laundering is not uncommon. Further,
a misunderstanding of local laws can lead to
unenforceable contracts that can blindside a
foreign-based operation.
© Association of Corporate Counsel
BUYER BEWARE: DO AN INTEGRITY CHECK BEFORE CONDUCTING BUSINESS IN THE MIDDLE EAST
Leveling the playing field
For this reason, major US, UK and European
corporations rely on offshore screening companies that can provide the localized research
required to properly vet foreign business
partners in the Middle East. Such companies
have access to the hard-copy records that aren’t
found online, and have the ability to locate
local sources that can aid in the investigation.
Armed with a familiarity of the terrain, an
understanding of the culture and an ability
to acquire information, these homeland-base
screening operations can easily uncover hardto-obtain facts that can play a vital role in the
business decision-making process.
And while foreign investigative companies
know their terrain, they’re also highly educated
in the local laws that govern business transactions, as well as the anti-corruption laws that
govern US, UK and EU-based businesses. This
dual knowledge ensures complete compliance
with FCPA regulations, UK Bribery Act laws,
anti-money laundering laws and other anticorruption regulations to which companies
must adhere.
The true value of retaining a foreign-based
investigative firm is that they can uncover
information that may not necessarily be on the
public record. Such information can include
potential involvement with the following:
• business or government officials who
regularly accept or require bribes;
• third-party sources (i.e., suppliers,
distributors, etc.) who regularly pay bribes to
officials;
• unscrupulous individuals who may be part
owners of the businesses with whom you
associate;
• minority business owners who may also be
government officials or have connections
with such;
• questionable individuals who may have
recommended a third-party partner;
• individuals who require payments in cash for
services provided;
• individuals who may not be experienced
in providing the products or services you
require;
• individuals who request commissions that
exceed normal commission levels; or
• organizations or third-party sources that
are not familiar with FCPA and other anticorruption laws.
While association with
such organizations or
The true value of
individuals may be referred
retaining a foreign-based
to as “business as usual”
investigative firm is
to many operations, such
that they can uncover
associations obviously
conflict with FCPA regulainformation that may
tions, EU laws and UK
not necessarily be on
Anti-Bribery rules, eroding
the public record.
public confidence in the
parties involved.
Used as part of a
comprehensive risk management program, a
thorough and professional offshore screening
operation that provides due diligence and business integrity checks will provide the measurable insight to reduce business, legal and
reputation risks when seeking partnerships in
unfamiliar markets. With the required capability to properly assess the background, integrity
and character of those individuals and organizations with which global companies seek to
affiliate, such offshore investigative companies
can help organizations remain compliant with
domestic and international regulations, while
still maintaining high standards of business
ethics and behavior. EMEA
a special supplement of ACC Docket5