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EY India\'s third party due diligence team help clients design, implement and maintain effective third-party diligence systems around the world.

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a challenging landscape

A challenging landscape

• Understand the business rationale for including a third party

in a transaction. You should understand the role of and need

for the third-party due diligence to be conducted and ensure

that the contract terms specifically describe the services to be

performed and the potential risks involved with these.

• Monitor your third-party relationships once they begin. Where

appropriate, this may include acquiring and exercising audit

rights, updating existing due diligence, conducting regular

training sessions and requesting third party to obtain annual

compliance certification.

Understanding who you conduct business

with has become more than just good

business practice; it is increasingly becoming

a smart compliance imperative. Multinational

organizations are rapidly adjusting to

enforcement standards according to which

companies are responsible for the actions

of their business partners and vendors, and

need to conduct effective third-party due

diligence on them. Be it the Foreign Corrupt

Practices Act (FCPA) in the US, the UK

Bribery Act or the recently enacted anti-

corruption regulations in India, Brazil, Russia,

China and Mexico, governments are taking

clear steps against the practice of making

improper payment through third parties.

Proper due diligence and monitoring not only helps to reduce

the risk of corruption, but can also cut down on fraudulent

transactions, embezzlement, conflict of interest, related-party

transactions and money laundering. They help a company to

safeguard its assets and reputation.

Responding to these emerging standards in a standardized

and efficient manner is however a huge operational challenge.

Management is often challenged by widely varying availability

of information across markets and fragmentation of their own

internal systems. The question is — how can one create a

consistent and, practical diligence process for third parties in

New York, New Delhi, Ningbo and Nairobi in order to mitigate

third- party risk? While guidance is in the context of anti-

corruption controls, the principles generally help third parties

deal with risk.

The Criminal Division of the United States

Department of Justice (DOJ) and the

Enforcement Division of the United States

Securities and Exchange Commission (SEC)

recently provided guidance on compliance

with the FCPA.

Some key points relating to third parties include:

• Understand the qualifications and associations of a third-party

partner, including its business reputation and its relationship, if

any, with government officials. The degree of scrutiny should

be risk-based, and you should increase your scrutiny if and

when red flags surface.

Simplifying third-party due diligence in a complex world

overcoming obstacles

Overcoming obstacles

Integrity

Consistency

Client

needs

Accessibility

1 Consistency

Our Integrity Diligence teams

understand this problem. We help

clients design, implement and maintain

effective third-party diligence systems

around the world. Our offerings are

built on our wide and long experience of

conducting complex international fraud-

and corruption-related investigations,

as well as fraud and corruption risk

consulting projects, in every major

market worldwide.

Our Integrity Diligence offering is

designed to respond to the following

needs of our clients

Standardized risk-based procedures for diligence that can be

practically implemented wherever our clients do business worldwide

2 Accessibility

The ability to continuously update and monitor diligence programs

from locals market to headquarters as well as a broad global network

of forensic professionals who are located near our clients and their

third parties

3 Integrity

A careful approach to applicable laws on data privacy and collection

in relevant jurisdictions

Simplifying third-party due diligence in a complex world

ey id is a technology tool created by ey to help

EY_ID is a technology tool created by EY

to help its clients efficiently and effectively

address the risks involved in their third-party

business relationships worldwide.

It also offers a highly customizable

platform that can be configured to meet

your specific program design, including

features such as the following:

The tool is a web-based, globally accessible

platform and provides companies with the

opportunity to collect relevant information

about their third-party partners, segment

third parties by their level of risk, conduct

and document multiple levels of due diligence

conducted on these, obtain certifications from

third parties and incorporate streamlined

approval processes in their operations. It

is designed to enhance standardization,

transparency and accountability throughout

the life cycle of a third-party partnership.

• End-to-end third-party life cycle management in a client-

branded and secure website

• Automated risk-scoring engine and self-directed risk

assessment tool to calculate third-party risk, based on

clients’ risk tolerance and priorities

• Highly customizable workflow manager with client-driven

approval hierarchy

• Secure and archived repository for third party records,

red-flag analyses and approvals

Addressing third-party risk in today’s environment

requires a systematic approach, and EY_ID is there to

provide the tools.

EY_ID offers advanced dashboards with

visual data analytics and an enhanced search

functionality.

Simplifying third-party due diligence in a complex world

today ey fraud investigation dispute services

• Today, EY Fraud Investigation & Dispute

Services India has more than 65 third-

party due diligence specialists with multi-

lingual capabilities. The in-house team

is proficient in English, German, French,

Spanish, Chinese, Japanese, Bangla and

various other Indian languages.

Commonly raised red flags

when conducting third-party due diligence

Sector focus

Omission of certain key personnel/

shareholders

Pharmaceutical

• An analysis of over 30,000 third-party due

diligence checks which were undertaken

in the last three years highlighted that

almost 50% of cases which were reviewed

had red flags.

Oil & Gas

A lack of information or trading history

(this factor alone would not rule out

start-ups)

Automobile

Financial services

A business address in a non-commercial

zone or at service office suites

Sector focus

FMCG

Retail

Pharmaceutical

Low capitalized company

Suppliers with a small capital base acting

merely as middlemen for undisclosed

suppliers

3

Technology

Oil & Gas

Automobile

Financial services

Tampering or irregularities with the

tendering process

Acceptance of late bids or bids being

accepted despite failings in technical

specifications or scoring, and bids at or

very close to set budgets

FMCG

Retail

Technology

Types of third parties representing the biggest compliance risk

of respondents

believe risks are

more likely to arise

from third parties

than from

internal staff.

55%

12%

Vendor/Supplier

Distributor

22%

Agent

of respondents have

no systems or

processes in place

to manage and

monitor third-party

relationships.

57%

Joint venture partner

26%

9%

Source: EY Asia-Pacific Fraud Survey 2013

Simplifying third-party due diligence in a complex world

our offices

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This publication contains information in summary form and is

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Arpinder Singh

+ 91 12 4443 0330 arpinder.singh@in.ey.com

Partner

Dinesh Moudgil

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Simplifying third-party due diligence in a complex world