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Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Bill Steinman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Shruti J. Shah
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

What’s it take to succeed as a local business partner?

In our experience, cooperation with the due diligence process, and developing a deep understanding of the compliance expectations held by multinational companies, are competitive advantages. They help local business partners stand out from the crowd, move through the due diligence process far more quickly, and grow a larger clientele among compliance-focused companies.

Though we’re not aware of any statistical studies on the subject to date — and they are much needed — the anecdotal evidence we’ve gathered over the years convinces us that this is the case. 

Compare the experience of two local business partners that Steinman & Rodgers recently encountered for one of its clients. The client in question, like many multinationals, has a written policy that prohibits working with a business partner until they have been vetted under the company’s due diligence process, and the parties have a written agreement in place.

One potential partner, located in France, was extremely slow in completing the client’s standard due diligence materials, and complained that the process suggested that the client’s didn’t trust them. After clearing this hurdle, it turned out that France Co. had an extremely complex ownership structure, with several layers of holding companies, including an offshore trust in the BVI with separate legal and beneficial owners. France Co. was loath to identify its ultimate beneficial owners, citing security and privacy concerns. 

It took months to unravel France Co.’s Byzantine ownership structure, and to convince it to identify the ultimate beneficial owners. During the lengthy due diligence process, the client secured a substantial direct sale in France that it had initially intended to structure as a resale transaction through France Co. To pursue the sale on its own, the client had to send its personnel in-country for extended periods of time, taking them away from other projects, and incurring significant travel costs. 

For its part, France Co. lost out on the profits it would have earned on the deal. At several points during the due diligence exercise, the client seriously considered walking away from the proposed relationship with France Co.  

On the other hand, the same client’s experience with a second potential partner was significantly more efficient — and from a compliance perspective, more comforting. The second company, based in Pakistan, was familiar with the due diligence requirements, applicable anti-corruption laws, and the need to cooperate in the process.

Pakistan Co. promptly completed the client’s standard diligence materials, which showed that Pakistan Co. was organized under local law, had no offshore ownership, and maintained its bank accounts in Pakistan. When the client raised some follow-up questions during the diligence process, Pakistan Co. responded quickly and with transparency. Rather than dragging on for months, the client was able to complete its diligence review of Pakistan Co. in Pakistan within a matter of weeks, and the parties soon executed a reseller contract. 

Both of these relationships were proposed at roughly the same time, and yet Pakistan Co. was actively pursuing sales for the client for at least nine months before France Co. finally agreed to embrace the diligence process and provided responses to the client’s questions. France Co.’s lack of appreciation for transparency caused the client to incur out-of-pocket expenses, and ultimately cost France Co. a sale.

Indeed, despite higher jurisdictional risks, transparency helped make a business partner from Pakistan more competitive than the one from France. In other words, cooperating with the due diligence process, appreciating anti-corruption compliance, and avoiding red flags are valuable competitive advantages. 

CIPE helps local companies become more attractive business partners for multinationals through a number of programs around the world. For example, in Thailand, CIPE and the Thai Institute of Directors — a leading corporate governance organization in the region — launched an initiative to provide anti-corruption training and establish a collective action program aimed at reducing supply-side bribery. By fostering familiarity and compliance with prevailing anti-corruption norms, and promoting the adoption of anti-corruption controls, programs such as this seek to help local companies grow their businesses ethically and honestly. They help local companies stand apart from competitors that have not undertaken such efforts. 

We have observed situations similar to France Co. and Pakistan Co. on many occasions, and we expect that readers have as well. If so, we would love to hear your experiences.

The take-away is simple. Multinationals operate under strict anti-corruption standards, and must conduct due diligence on their business partners.  Understanding and embracing these requirements saves time, effort and money, and helps parties establish their business relationships more efficiently. 


Anna Kompanek, pictured above right, is the Director for Global Programs at the Center for International Private Enterprise (CIPE). Her expertise, including training and capacity building for private sector organizations and businesses, is in the areas of anti-corruption compliance, governance, and management. Kompanek holds a designation of Certified Compliance and Ethics Professional-International (CCEP-I). Connet with Anna on Twitter at @AnnaKompanek

Bill Steinman, left, is a Contributing Editor of the FCPA Blog. He’s the senior partner at Steinman & Rodgers LLP, a boutique law firm in Washington, D.C. specializing in international anti-corruption compliance and investigations.

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