Integrity Due Diligence

An integrity due diligence check (often abbreviated to integrity due diligence , also integrity due diligence , reputation due diligence , compliance due diligence or third-party due diligence in accordance with the English legal and business jargon) Diligence ) is a careful examination of actual or potential business partners of a company with regard to the risk that these partners engage in illegal or dubious business practices - in particular corruption . The acronym IDD has established itself in international and German literature .

risk

Business relationships with dubious business partners can result in costs in connection with investigations by authorities, fines, exclusion from public contracts and reputational damage . Due to the international activity of many companies, not only the legal norms valid at the headquarters of a company are decisive.

aims

A due diligence check with regard to the integrity of a business partner is on the one hand a measure that is intended to help ensure compliance with legal norms.

On the other hand, the integrity due diligence should also be understood as a measure to safeguard assets, since the company's good reputation - an intangible asset - is to be preserved.

methodology

Although there is certainly no general or standardized methodology for integrity due diligence, one can distinguish between two types of investigation:

An open source investigation involves obtaining information about the target person or company from publicly available sources that are offered either free of charge or for a fee. These include B. websites, newspapers, or extracts from the commercial register, but also chargeable databases such as Factiva, LexisNexis or Datastar.

Often information from open sources is combined with information acquisition from human sources (so-called human intelligence ). In this type of investigation, people are interviewed who are close to the company or person to be investigated, or who know something about the target based on their profession or contacts (e.g. journalist, lawyer, etc.). The questioning of these sources can be done both openly and covertly.

Regardless of the type of investigation, the following points of interest are usually covered: Review of commercial register information ; Media and internet research; Clarification of ownership; Review of reputation; Evidence of corruption, bribery, fraud, criminal activity etc .; Indications of contacts or connections with government officials or politicians and indications that these connections have been misused.

Legal obligation to perform integrity due diligence

United Kingdom

The Bribery Act 2010 of the United Kingdom of Great Britain and Northern Ireland of April 8, 2010 - the British Anti-Corruption Act - in Article 7 not only criminalizes direct corruption, but also the failure to carefully scrutinize business partners. It should be ensured that the business partners do not commit corruption. The background is probably the experience that representatives are often used for dirty work in markets where lucrative business is not possible without bribery.

The measures required by companies are described in separate guidelines. In Rule 4 of these guidelines, integrity due diligence is required.

United States

In the United States of America , the Foreign Corrupt Practices Act - the American anti-corruption law for doing business abroad - regulates the obligation of companies to conduct and document integrity due diligence reviews. Here, too, there are guidelines that describe the companies' obligations in more detail.

Indirect commitment to integrity due diligence

United Nations Global Compact

The United Nations Global Compact contains the fight against corruption in all its forms as the 10th principle and due diligence is also listed among the instruments for combating it.

With this pact, a standard was created that could, if necessary , be consulted by the courts when interpreting the due diligence obligations of management .

Partnering Against Corruption Initiative of the World Economic Forum

The World Economic Forum's Partnering Against Corruption Initiative (PACI) set up a working group in 2011 to deal with the creation of a third party due diligence handbook .

Germany

In Germany there is currently no legal obligation to carry out IDD. However, due to the obligation of the management to generally ensure compliance for their company, there are liability risks through organizational negligence if possible and reasonable precautions are neglected - IDD can reduce these risks. There is no fixed standard for the due diligence of the management - these have to be constantly adapted to changes in economic life. However, guidelines from international organizations can be used to specify the due diligence requirements. In the event of a complete waiver of IDD activities, the management runs the risk that, in the event of wrong decisions, the liability of the executive body becomes effective and is not restricted by the business judgment rule .

Use of the IDD in a company

In terms of method, IDD can be introduced in different ways, although due to the large number of business partners, there is no avoiding classification and concentration on potentially critical groups of business partners. Since the original main purpose of IDD is the fight against corruption, which should Corruption Perceptions Index (English: short and Corruption Index Corruption Perceptions Index, CPI for short) are called in the spatial determination closer to be considered business partners. With regard to the function of the business partner, commercial agents are in the foreground, as their activities are very closely linked to the name of the company they work for. With a matrix with the corruption index and the function of the business partner, groups of business partners can be defined for which the information to be collected, the depth of research and the organization responsible for the research (own employees; external service providers) have to be defined. A form appropriate to the size of the company and the risk must be found in the design - considerations that a judge will also take into account when considering compliance with the duty of care.

Practical meaning

In the reports of German corporations, there are usually references to their measures to ensure compliance. "In 2011 we fundamentally revised and improved the procedure for identifying and eliminating integrity risks vis-à-vis business partners (compliance due diligence)."

The fact that, in addition to the large auditing firms, a number of consulting firms specializing in IDD and IDD concepts now also offer their services, speaks in favor of taking the IDD into account in an increasing number of companies.

literature

• Alexander Ghazvinian: Third Party Due Diligence - Only for Other Companies? , In: Der Schweizer Treuhänder, 12/2012, pp. 968–972

Web links

• Homepage of the British Ministry of Justice - Bribery act
• UN paper pdf 99 KB - English
• Maddocks Insight - Goals and Methods of Integrity Due Diligence
• 2010 FEDERAL SENTENCING GUIDELINES MANUAL - CHAPTER EIGHT - SENTENCING OF ORGANIZATIONS

Individual evidence

1. ↑ s. Ghazvinian p. 968
2. ↑ s. bribery-act-2010-guidance pdf 390 KB - english
3. ↑ see also the article in the English language Wikipedia: Foreign Corrupt Practices Act
4. ↑ A RESOURCE GUIDE TO THE US FOREIGN CORRUPT PRACTICES ACT pdf 1449 KB - English ( Memento of December 3, 2012 in the Internet Archive )
5. ↑ see homepage of the United Nations Global Compact Anti-Corruption Tools Inventory Fighting Corruption and Implementing the 10th Principle ( Memento from July 1, 2014 in the Internet Archive )
6. ↑ 18th PACI Task Force Meeting Executive Summary pdf 8873 KB - English
7. ↑ Ghazvinian shows one possible approach
8. ↑ Annual Report 2011 Daimler - Integrity and Compliance [1]  ( Page no longer available , search in web archives )  Info: The link was automatically marked as defective. Please check the link according to the instructions and then remove this notice.