Practical Compliance
Engaging Intermediaries in High-Risk Jurisdictions
What steps should you undertake when engaging a local agent or consultant or another intermediary, particularly if that party receives performance-based compensation, in a high-risk jurisdiction?

Answer: In addition to verifying your intermediary’s experience and expertise in the particular field, its track record and business reputation, you need to obtain detailed ultimate beneficial ownership information.  This will allow you to understand exactly who your partners will be and help screen for risky connections to the local government (as a party that is owned by a foreign official or by people with ties to foreign officials may pose a much higher risk).  Use of off-shore companies or otherwise obscured beneficial ownership information, should be treated as a red flag and, unless proper explanation is provided, you should not proceed with the engagement.

An engagement that includes performance-based compensation requires you to have an informed understanding of normal compensation or commission ranges in the particular market and implement procedures to flag and review any unusual requests.  You should also evaluate the scope of work performed by the intermediary and its added value to the company, relative to the amount of the compensation requested.  In addition, you should investigate the use of funds, i.e., you need to understand the purpose for which the payment will be used and ensure that no portion of the compensation is intended to be used as an improper payment.  All requests for an increase in compensation or change of the agreement terms should be accompanied by the appropriate justification and all decisions approving or rejecting such requests should be memorialized in writing.  
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