Understanding who owns your third party is an increasingly important part of due diligence, and best practices are evolving towards obtaining more ownership information. An accurate understanding of the ownership of a counterparty can help identify risks such as:
- Hidden PEPs or government shareholding (FCPA risks)
- Sanctions (OFAC risks)
- Collusion and Conflicts of Interest
Unfortunately, there are often barriers to obtaining official ownership information, with disclosure requirements and information availability varying greatly around the world. This necessitates a risk-based approach—obtaining as much information as is reasonable and proportional to the risk profile of the third party. Where barriers are encountered, the costs of obtaining ownership information must be balanced against transaction and geographic risks or other risk profile information. Where official information is completely unavailable, source commentary or targeted media research can establish an unofficial record of a high-risk third party’s ownership.
Our new brief explores some risks that can be averted through beneficial ownership research and outlines the many barriers to uncovering ownership information. It concludes with a discussion of how a range of research and investigative options can support an agile, risk-based due diligence program.