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Blog 25 March 2021

Risks of Cooperation with Counterparties from Countries with a High Level of Corruption

Risks of Cooperation with Counterparties from Countries with a High Level of Corruption

The location of participants or beneficiaries of a company in the so-called risky jurisdictions attracts special attention of the National Bank of Ukraine (NBU) within financial monitoring. We devoted a separate article to this factor. You will find the whole series of articles on risk factors and the provisions of the Law on Financial Monitoring at the end of this article.


The Corruption Perceptions Index is a global ranking of countries concerning their corrupt practices. The index considers corruption only in the state sector on the basis of data from reputable international organisations and research centres. The key indicator of the index is the number of points. The minimum score – 0 points – means that corruption actually replaces the state, the maximum – 100 points – indicates that corruption is almost absent in society. For example, leaders of the Corruption Perceptions Index in 2020 were Denmark and New Zealand. In 2020 Ukraine with 33 points occupied the 117th place among 180 countries in the ranking.


The NBU considers the presence of a company in a country with a high level of corruption as a risk factor in terms of financial monitoring and obliges to regularly check data of such counterparties. And the Express Analysis of YouControl draws your attention to that while checking a counterparty.


Why Is It a Risk Factor? 


In terms of financial monitoring “risky links” are meant here, that is, your business "neatness" in choosing business partners.


Due to such a partnership, the inspection authorities may conduct an audit to obtain tax information on taxpayers. In particular, concerning counterparties involved in the supply chain of goods, works and services that are a subject of controlled transactions. The information obtained as a result of such audits may be the reason for further unscheduled inspections, appeals to the law enforcement agencies, fines.


The EU member states may impose their own restrictions on such entities and their partners. Counterparties of the entity subject to national or international sanctions, depending on their nature, may be deprived of the opportunity to conduct any transactions at all, including payments under agreements.


It is also important for the businesses that develop international trade relations. In western countries companies are severely punished for failing to prevent corrupt practices of their business partners. This is one of the reasons why American and British companies do not risk opening their representative offices in Ukraine and working with Ukrainian companies. And if a Ukrainian company seeks to operate without intermediaries in international markets, with profitable contracts and to attract investments, it must control anti-corruption processes.


To the topic: "The Company That Uses Compliance Inspires More Confidence"


Finally, trade with countries with a high level of corruption increases the probability of getting on sanctions lists, in particular, because of violations of international law on terrorist financing and laundering of proceeds from crime.


How to Find Out about the Origin of Companies from Risky Jurisdiction


The non-resident’s affiliation to such a jurisdiction is shown in the profile of a counterparty, first of all in the Express Analysis.


To start checking, enter a company name or its code according to the Unified State Register of Enterprises and Organisations of Ukraine in the search line on the main page.


When the profile of the company appears on the screen, the results of the Express Analysis will be at the beginning of it – in the form of a list of risk factors and three tabs. And more detailed data will be in the tab "Profile overview ⇛ Participants and beneficiaries", including the founder’s address.


Thus the process of checking counterparties becomes quick and easy, even if you have never done business intelligence before.


This is just one article from a series of articles about risk factors. Other articles are as follows:

1. What if a Counterparty Does Not Have a Licence?

2. Checking of the Director before Concluding an Agreement with a Company.

3. How and Why to Check the Powers of the Director.

4. Risky Types of Activity of a Counterparty.

5. What Do Frequent Changes in the Documents of a Company Indicate.

6. Risks of Cooperation with Tax Evaders.

7. Why Is the Reputation of a Counterparty Important?

8. Counterparties from Countries with a High Level of Corruption – you are here.

9. Risks concerning the Authorised Capital of a Counterparty – soon.

Start checking right now!


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