Why companies must be careful when choosing who to do business with

Aziz Rahman, of award-winning business crime solicitors Rahman Ravelli, explains the vital importance of knowing who you can and cannot trade with.

In every line of business, those involved are looking to make a deal. But whatever the business sector, there is always the risk of legal problems if you do not take the proper precautions.  This means carrying out due diligence on those you are looking to trade with or have represent you in a deal.

If business is being done abroad, it may be more difficult to establish the nature and quality of the company or person you are looking to trade with. But that is no excuse for not making the appropriate checks. If there are legal reasons why you should not trade with someone, the penalties can be severe if you ignore them or are unaware of them. Due diligence has to be done.

Reminder

The Policing and Crime Act 2017 is a strong reminder of this. The Act, which came into effect last month, introduces a tougher range of penalties for those who fail to comply with restrictions on individuals in certain financial markets and services or who ignore directions to stop trading with a person or organisation in a particular country or business sector.

This Act affects any person and company doing business in the UK; even those with no base here who conduct a transaction via the UK or buy UK financial products for use overseas.  Failure to comply with it and trade with people who are the subject of such sanctions can lead to fines of £1 million or more.

It is not the only legislation that carries heavy penalties for those who trade in places or with people they are not supposed to. But it is another clear indicator that the authorities want those in business to police themselves and prevent, or at least identify, wrongdoing – wherever in the world, and in whatever, they are trading.

Compliance

This Act is expected to mean more prosecutions, civil penalties and out-of-court settlements. It is one of a number of recent pieces of legislation – such as those relating to bribery and money laundering – that increases the need for those in business to devise compliance procedures to reduce the chances of them breaking the law.

Compliance means having policies devised and introduced to:

  • * Make sure proper checks are done on individuals and companies you may be about to do business with.
  • * Reduce the potential for wrongdoing by staff or trading partners.
  • * Give staff the chance to raise any suspicions about business partners or colleagues in confidence.
  • * Have such suspicions investigated and acted on appropriately.

For those in business who recognise that they need such procedures but are unsure how to instigate them, legal advice is always available. Such advice is also available if and when a company recognises wrongdoing and wishes to self-report it; which can mean a lesser penalty under the Policing and Crime Act and other legislation covering business crime.

In this day and age, there is even software that can help carry out the checks that should be made as part of due diligence. Caution has to be on everyone’s agenda.

Aziz Rahman is founder of Rahman Ravelli; a top-ranked business crime law firm in national and international legal guides.

www.rahmanravelli.co.uk

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