Welcome to the latest issue of The Anti-Fraud Network Newsletter:

Letter from the Editor, May 2016

In this issue, Aidan Colclough explains why the possibility of facing huge fines or prosecution as a result of falling foul of the UK Bribery Act or the FCPA, should not dissuade small and medium sized enterprises from taking advantage of the potential for high growth in emerging markets overseas.

The AFN has recently teamed up with Routledge to offer AFN members and readers a 20% discount on fraud books. To obtain your discount on titles such as The Changing Face of Compliance, Confronting Corruption in Business, Corporate Social Irresponsibility, Cyber Security, Fraud and Corruption in Public Services, In Pursuit of Foresight, The Origins of Ethical Failures, Security Culture, and The Tone from the Top, click here and use code AFN16 at the checkout.

We are always interested in articles and book reviews written by AFN members and readers. If you would like to contribute to the AFN newsletter or the website, please contact us at info@antifraudnetwork.com.

Nick Burkill

In This Issue:

Risk-based due diligence: SMEs and low risk engagements

AidanColclough2016Small and medium-sized enterprises (SMEs) are increasingly trading outside their local regions to access the opportunity and potential for high growth in emerging markets overseas. In Europe, for example, a survey authorised by the European Commission highlights that about half of SMEs in the European Union have been involved in international business outside the European Internal Market over the last three years.

A direct consequence of this internationalisation of commerce is that SMEs are often finding themselves engaging with third parties around the globe to facilitate their business operations.  In the wake of the UK Bribery Act 2000 (Bribery Act), and under the extensive reach of the US Foreign Corrupt Practices Act 1977 (FCPA), liability for corruption can be triggered when a bribe is paid indirectly through a third party. This opens up significant risks, and SMEs, unlike their blue chip counterparts, may not be so well versed with anti-corruption procedure and may lack dedicated compliance teams.

The vast fines consistently levied by the US Department of Justice (DoJ) and Securities Exchange Commission (SEC), and those imposed by the United Kingdom’s Serious Fraud Office are a clear reminder that the importance of effective third-party due diligence cannot be understated. Indeed, following a recent prosecution, the chief of the SEC Enforcement Division’s FCPA Unit noted that

This is a wake-up call for small and medium-size businesses … when a company makes the strategic decision to sell its products overseas, it must ensure that the right internal controls are in place and operating.

Although recent enforcements and media attention may dissuade SMEs from participating in international commerce and establishing valuable relationships with third parties in overseas territories, such a response would be an overreaction; with appropriate measures in place, there is a way forward.

What is effective due diligence?

Both the United Kingdom and the United States recognise that, to be effective, due diligence does not always require a “kitchen-sink” approach; the extent of corruption risks will vary and, accordingly, so will the level of due diligence required.

Under the Bribery Act, a company will not be guilty of failing to prevent an act of bribery carried out by a third party on their behalf if they have “adequate procedures” in place to prevent such conduct. To demonstrate the presence of these adequate procedures, guidance from the Ministry of Justice recommends that the level of due diligence should be proportionate to the risk of corruption faced by the company and conducted using a risk-based approach.

DoJ and the SEC, through enforcement policies and Opinion Releases, have provided guidance on the FCPA, stating that the degree of due diligence necessary may vary depending on a number of factors, such as the industry, location, size and nature of a transaction, and the historical relationship with the third party.

Identifying risk

The engagement by a company of any third party agent poses a risk, but the level of that risk will vary.

For example, a UK company contracting with a distributor based in Denmark to resell products to Denmark-based retailers does not present the same level of risk as a UK company engaging a business consultant in Kazakhstan chosen by an official of the contracting company, for the sale of equipment to a large state-owned oil company.

These contrasting scenarios highlight that risk factors such as industry, geographical location and the nature of the third party relationship are all relevant in assessing what will be required for due diligence to be effective. Continue reading

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Who We Are

The Anti-Fraud Network is a network of professionals who specialise in the prevention and investigation of fraud and white collar crime, and the pursuit of claims arising out of the theft or other dishonest appropriation of assets, corruption, misuse of confidential information or similar breaches of duty. Recovering the proceeds of fraud and corruption is one of the truly global problems facing organisations today. Proceeds rarely stay in the country where they have been stolen. For organisations to recover stolen or corrupt assets they need access to lawyers and professionals specialising in their recovery across the world.

The Anti-Fraud Network is dedicated to providing access to trusted points of contact across the globe and offering a unified first-class international service to clients, at a time when experience, speed, co-operation and highly responsive service are most important.

The Anti-Fraud Network has been Highly Commended by the Financial Times in the 2008 FT Innovative Lawyers Awards Report.

UK Bribery Act Interview


Corporate IntlNamed 2013 “Anti-Corruption Law Firm of the Year in London” by Corporate INTL’s Global Awards Publication.

Corporate INTL, 2013

Chambers and Partners LogoNicholas Burkill of Dorsey & Whitney is an expert in bribery and corruption matters, and is widely considered by sources to be an authority on the implications of the new Bribery Act. Sources describe Burkill as “extremely personable, very bright, client-focused and always looking for the best commercial solutions.”

Chambers 2011

The Legal 500 - United KingdomThe Dorsey team is an excellent choice for tax and fraud disputes, and group head Nicholas Burkill is ‘an enormously experienced fraud litigator, with great depth of knowledge; intelligent and hardworking, with an excellent sense of humour. One of the best around’.

Legal 500 2010

Dorsey & Whitney’s practice head Nicholas Burkill is a ‘cool-headed and determined litigator’.

Legal 500 2011