Business Partner Compliance Checks


Spotting Red Flags, Achieving Business Success

When you apply for a new job, the hiring officer will run a background check on. When you apply a loan from a bank, the manager will look at your credit history. When you visit another country, the immigration officer runs a derogatory check on you.

When you’re a business owner, you also need to know about business partner compliance checks.

For your business to grow, forging partnerships is imperative. Even small businesses need the services of other entities to achieve their own goals. The resulting alliance is a win-win strategy; all parties need to benefit from one another. If one or two partner fails in one aspect, the whole business will dwindle.

What is a Business Partner Compliance Check?

The term “business partner” is any commercial party with external business ties to the company. This includes, but not limited to, consortium partners, consultants, auditors, suppliers, contractors, distributors, sales agents and customers.

Can you imagine if any one of your business partners underdelivers? What if a consultant gives the wrong advice? How would you react to a supplier that provides substandard quality? Is there poor credit history among any of your partners?

For your business to thrive in a competitive world, these are valid concerns. When your partner, for instance, engages in illegal or improper conduct, you may be held liable as well. A company, whether how small or complex, needs to perform compliance screening on all its business partners.

A business partner compliance check is therefore a measure to verify compliance to all requirements as applicable by law. This concerns regulations and policies like money laundering, human trafficking and customs bribery. The extent of what laws should be followed depend on the country; the United States has The Foreign Corrupt Practices Act of 1977 and the United Kingdom has the UK Bribery Act, for instance.

The goal of a business partner compliance check is to protect the company from potential liabilities and negative reputation. This procedure determines a risk before it becomes an actual problem.

There is no one-size-fits-all compliance check as companies utilize their own screening procedures or hire the services of a professional firm that specializes in these checks. Most of the time, companies exceed their country’s legal requirements for business partner compliance checks.

The Concept of Due Diligence

By definition, due diligence is the process of investigating any commercial entity before a major event or milestone, such as contract signing. Although the term is heavily used in legal contexts, it is a central concept in business partner compliance checks.

Through data collection, verification, and evaluation, you will be able to identify potential risks or red flags that should bear weight in your decision-making.

As a businessman or manager, you practice due diligence by investigating every aspect of a potential business partner. From the largest consortium partner down to the last customer—every business should look into its partner’s corporate responsibility, financial performance and client feedback.

The Business Partner Compliance Check vs Other Procedures

It is worthy to note that there are other measures to investigate a business partner: the business partner background check (or company background check), and the business partner integrity check.

The “Fishy” Business Partner

So what makes a shady business partner? Once you have the results of your compliance checks, here are common red flags that you should look out for:

● History of deception, bribery, corruption, money laundering, human trafficking, terrorism and other illegal acts

● Poor feedback from co-vendors, contractors or customers

● Refusal to comply with requirements and instructions

● Close ties with government officials resulting in unnecessary recommendations

● Non-transparency in financial transactions

● Failure to provide complete and correct invoices

● Ludicrous quotation for services or demanding advance payments

● Absurd proposed outcomes that seem “too good to be true”

The Benefits of Business Partner Compliance Checks

Performing business partner compliance checks may exhaust a lot of resources, but not without benefiting the company as a whole.

The advantages include:

● Proper management of business relationships through a structured and transparent approach

● Prompt risk classification allows for identification of potential problems that may arise when working the the business partner

● Effective use of an IT application process with compliance checks ensures transparency and efficiency of the results

No matter how financially exhausting and time-consuming this process is, companies see it as a wise investment. The benefits of a compliance check far outweigh its weaknesses. Can you imagine your business suffering from a standstill, or a huge drop in sales, or angry customers—because of one business partner who failed to do their part? It’s true that it takes years to build a reputation, and only minutes to shatter it. Even when you’re still starting, make it a point to perform routine compliance checks to all your potential business partners.

There are many consulting, auditing and security firms that specialize in business partner compliance checks. The rates vary across different countries and the extent of the compliance check. Many firms will be happy to personalize it as your own tool, specifically for your company’s needs and goals.