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Glossary

REPORT’S SECTIONS

+ Commercial Registers

Commercial Registers are probably the most common type of public governmental database. In a wide range of countries, online registers containing information about national companies can be found.

 

The most valuable information in these registers is the companies' corporate names, dates of registration, registered numbers, address(es), legal form and purpose, just to name a few.


Some national administrations require - and thereby publicize - further information, such as names of directors, shareholders, status or corporate documents. On the other hand, some others countries' registers are still very secretive and need to be consulted on site.

+ Financial Data

Global Risk Profile primarily provides the financial information gathered from official sources, such as chambers of commerce & industry, tax authorities or other governmental registers. We also collect information from private actors, such as solvability ranking agencies (e.g Creditreform), stock markets and even the researched subject's publications on the matter.

 

The type of information provided includes annual financial statements, up-to-date balance sheets, insolvency records, solvability analyses and any other kind of pertinent information.

+ PEP/SOE

A Politically Exposed Person (aka PEP) is a natural person who holds or has held an important public office, such as head of state, member of government or parliament. It is very important to note that not only the PEP himself/herself but also his/her immediate family members, as well as close associates, must be considered as PEPs.

 

The definition of PEP is commonly based on the Financial Action Task Force's (FATF) definition:

 

A current or former senior official in the executive, legislative, administrative, military, or judicial branch of a foreign government (elected or not);

 

A senior official of a major foreign political party;

 

An immediate family member of such individuals; meaning spouses, parents, siblings, children, and spouse's parents or siblings;

 

An individual publicly known (or actually known by the relevant financial institution) to be a close personal or professional associate;

 

In a broader sense, partially or wholly state-owned legal entities are also considered as PEPs, as much as their respective top managers.

+ Legal Cases

Global Risk Profile defines a legal case as any current or past judicial procedure against a person or a company. We distinguish civil and administrative judicial procedures from penal procedures, which are heavier in terms of consequences. However, judicial public records are not available everywhere in the world in the same way. You might find some on the public Internet, but most information is only available on site. Global Risk Profile constantly expands the country coverage of its archives for such kind of information.

+ Sanction Lists

Sanction lists are issued by various entities throughout the world. They disclose the names of companies, groups, associations, individuals and States that are "blacklisted" by one or more authority, both public and private. Some of the existing sanction lists' publishers are the Bank of England, the Department of State, the FBI Top Ten Most Wanted, the Interpol Most Wanted, the UN Consolidated List, etc.

+ Executive Summary

The Executive Summary is placed at the beginning of our StandardPLUS and Enhanced reports. It brings out the report's key points and lets you discover the broad context and pedigree of the subject in a single glance.

+ Relevant News

The "Relevant News" section includes all occurrences of the researched subject in the medias, which could be considered pertinent with regard to its activities.

 

For companies, it would be for example press releases about a new top manager's appointment or newspaper articles about the merger with another company. The section aims at highlighting significant events of the subject's history.

+ Sensitive News

The "Sensitive News" section includes all occurrences of the researched subject in our specialized archives and medias, which would be considered negative according to common sense.

 

All crime, legal proceedings, economic difficulties or scandal-related news are considered sensitive, as much as all other reported facts that could possibly affect the business continuation of the subject or its integrity.

 

Global Risk Profile communicates such news when they could be considered as sensitive, even though they might be impossible to verify.

+ Related Companies

The section "Related Companies" provides information (e.g. corporate name, location, registration numbers, key individuals, purpose, etc.) about all legal entities considered related to the researched subject. It also clarifies the nature of the relation between these entities and the considered subject.

 

For an entity to be considered as related, several criteria can come into play. The strongest and easiest way to establish a link is of course to find evidence of a legal bound (e.g. between a company and its branch office). In more blurred situations with no explicit connections, it is often through the presence of the same key individuals within the directors, managers or shareholders that a relation can be established.

 

Some thinner relations such as similar addresses, resembling names or same Internet servers are indications calling for further research, but are to be taken with precaution and can not establish a formal link.

+ Related Key Individuals

The term "key individuals" refers to all natural person linked to the company at the highest level. It is commonly understood as including top managers, members of the board of directors and major shareholders.

 

The biographies encompass all relevant information about both their private and professional life. Depending on the availability, the biographies include known aliases, exact places and dates of birth, nationalities, addresses, civil status, education and trainings, past and current activities and any other important facts. They also specify whether or not they are listed as PEP or mentioned on any sanction list.


INVESTIGATIVE DUE DILIGENCE’S LEXICON

+ Open Source / Public Information

"Open source" or "public" information refers to all pieces of information that are not considered confidential and are thereby accessible to anyone.

 

With the recent years' quick development of the Internet and the new ways to use it, the amount of public information exploded. Among the new trends, the most important in our line of work was undoubtedly the setup of governmental public databases (such as online registers) and the development of numerous specialized databases by private operators.

 

In addition to these, the massive use of social networks also generates a consequent volume of information, as much as the online presence of almost every media on earth and the subsequent constitution of online archives.

 

Governmental and private databases as well as social networks and online medias thus became the biggest supply channels of public information, way ahead of any other online or offline publications.

+ Due Diligence / Investigative Due Diligence

The notion of Due Diligence came into common use following to the U.S Securities Act of 1933, which expressed the need for broker-dealers to perform "due diligence" investigations about the companies issuing the securities they were selling. As long as they could prove they conducted sufficient inquiries, they would not be held liable for non-disclosure. The "Due Diligence" in these investigations was defined as the depth of inquiry that a prudent man would ensure while administrating his own properties.

 

In the current meaning, due diligence refers to the necessary initial evaluation of risks to conduct about a counterpart prior to establishing a business relationship, as much as to the process of periodically ensuring the integrity of existing relationships. Pursuant to the numerous anti-bribery and anti-money laundering legislations enacted in most countries, almost every financial institution and large company nowadays has to implement due diligence programs on a mandatory basis or risks facing important penalties.

 

The Investigative Due Diligence, sometimes referred to as "Enhanced Due Diligence", is a much more specific process. Unlike other kind of control (audits, market analysis, etc.), it has to be totally independent and thereby relies as less as possible upon information provided by the researched subject. The other important difference lays in the methodology: where commercial or financial due diligence analyses the information, the purpose of the Investigative Due Diligence is to provide reliable and pertinent but brute information. Global Risk Profile's reports state the facts without expressing opinions, judgments or interpretations.

+ Red Flags

"Red Flags" refer to all pertinent facts indicating a possible risk attached with a relationship.

 

In the U.S.A, The Red Flags Rule was firstly based on the "Fair and Accurate Credit Transaction Act of 2003" to help identity theft prevention. In a broader sense, the notion can be assimilated to all signals of a potential financial, criminal or legal risk attached with the creation or the continuation of a business relation.

 

When carrying out a Due Diligence investigation, we carefully watch out for the presence of such red flags. This would primarily be the appearance of the researched subject on an international or governmental sanction list, the existence of past or on-going legal proceedings or even irregularities in official documents, as much as an unusual operational structure regarding the standards of the considered sector (e.g. an individual registered as the director for over fifty companies).

+ Third Parties

Third parties shall be understood as all natural or legal persons who may have any kind of business or legal relation with the client.

+ Specialized Databases

The information market grew bigger and bigger these last 10 years helped by the massive diffusion and use of Internet and social networks. The so-called "big actors" like Reuters, Dun and Bradstreet, Bloomberg and others have stepped on the market very soon and have continuously upgraded their offer.

 

These specialized databases offer information about politically exposed persons (PEP), governmental sanction lists, litigation records, solvency data and negative news selections. But a huge number of websites, especially in the US and UK, offers background checks on individuals and references verification, online commercial registries, etc. Obviously, these websites may be fraudulent themselves, and thus have to be considered with caution.

+ «Big Data»

The "Big Data" phenomenon commonly refers to the huge amounts of information poured over the Internet everyday. According to IBM, Internet users create 2.5 quintillion (the approximate content of 200'000'000'000'000 sheets of paper) bytes of data every day; so much that 90% of the data in the world today has been created in the last two years. Data come from everywhere, from social medias to GPS signal and transaction records.

+ Ad Hoc Solutions and Programs

Among the solutions that are currently on the market, we can divide them between the target solutions and the process solutions. The first ones are aimed at solving one specific problem whereas the second ones refer to a set of actions aimed at avoiding and eventually managing the problems. While investigators, external advisors or auditors are solicited to address specific issues, the processes are used to help managing, studying, verifying and delivering clearance to specific aspects of the life of a company.


CRIMINAL TERMINOLOGY

+ Fraud

The specific legal definition of the fraud varies from legislation to another, but it is commonly understood as an intentional deception made for personal gain or to damage another individual.

 

As a matter of fact, the crisis of 2008 has acted as a powerful booster on unlawful behaviours and fraud in particular. As a 2011 PwC’s study shows, intern fraud has particularly increased. Thus, 34% of the 3877 companies that participated to the survey claimed to have been victim of fraud in the last 12 months. The percentage rises to 54% in the case of large companies (more than 1’000 employees)

+ Corruption

Transparency International gives the following definition of corruption:

 

"Generally speaking as 'the abuse of entrusted power for private gain'. Corruption can be classified as grand, petty and political, depending on the amounts of money lost and the sector where it occurs.

 

Grand corruption consists of acts committed at a high level of government that distort policies or the central functioning of the state, enabling leaders to benefit at the expense of the public good. Petty corruption refers to everyday abuse of entrusted power by low and mid-level public officials in their interactions with ordinary citizens, who often are trying to access basic goods or services in places like hospitals, schools, police departments and other agencies. Political corruption is a manipulation of policies, institutions and rules of procedure in the allocation of resources and financing by political decision makers, who abuse their position to sustain their power, status and wealth."

 

(Source: Transparency International)

+ Money Laundering

According to INTERPOL's definition, money laundering refers to "any act or attempted act to conceal or disguise the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources".

+ Non-compliance

Non-compliance means the failure of a natural or legal person to meet mandatory regulatory or legal requirements.


LEGISLATIONS, REGULATIONS AND PRACTICES

+ The Foreign Corrupt Practices Act (FCPA)

"The Foreign Corrupt Practices Act of 1977 ("FCPA") was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. Specifically, the anti-bribery provisions of the FCPA prohibit the willful use of the mails or any means of instrumentality of interstate commerce corruptly in furtherance of any offer, payment, promise to pay, or authorization of the payment of money or anything of value to any person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to a foreign official to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an act in violation of his or her lawful duty, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business to, any person." (Source: United States Department of Justice)

+ Know Your Customer (KYC)

KYC refers to the necessary controls and due diligence activities that financial institution and other regulated companies have to perform in order to get and verify all relevant information about their clients prior to establishing business relations. These controls firstly aim at preventing money laundering. Companies also use such processes to ensure all their suppliers', resellers', agents' and any other involved third party's ant-bribery compliance.

 

KYC controls typically include the following details:

 

Ensuring that only legitimate and bona fide customers are accepted;

 

Ensuring that customers are properly identified and that they understand the risks they may pose;

 

Verifying the identity of customers using reliable and independent documentation;

 

Monitoring customer accounts and transactions to prevent or detect illegal activities;

 

Implementing processes to effectively manage the risks posed by customers trying to misuse facilities.

 

Source: http://www.austrac.gov.au/elearning/pdf/intro_amlctf_know_your_customer.pdf

+ UK Bribery Act (UKAB)

The UK Bribery Act is the British equivalent to the U.S Foreign Corrupt Practices Act (FCPA). The Act details the offenses of bribing another person as much as letting oneself be bribed. Moreover, it renders companies responsible for failing to prevent bribery committed on their behalf by employees, agents or subsidiaries.