"Always check a company’s ownership structure carefully" - this was advice I remember clearly during my early days in this field.

A few years ago, a client asked us to perform some routine checks on a small company they were planning to start working with. The company was located in a country ruled by an autocratic government, which was experiencing increasing economic and socio-political strife. This meant operating in this country was becoming increasingly difficult, without tarnishing your reputation.

Checks showed the company appeared to be low risk to do business with but it did appear to be part of a more complex ownership structure, with possible links to as yet unknow entities, none of which had been identified through discussions with the company. Visits to the country registry and through trawling local media reports we were able to uncover much more information about the subject company’s ownership structure identifying not just the parent company but a number of subsidiaries.

This in turn led us to a key shareholder who with other members of his family raised an array of issues that could have harmed our client’s reputation. One of these critical issues was that this shareholder and other members of his family owned several sanctioned entities across the world. They were also identified as having been involved in a number of serious scandals involving bribery of government officials for the award of lucrative contracts and even helping the national government oppose opposition politicians.

We compiled this report for our clients, showing how the company they were in business talks with, was linked to sanctioned entities, and was ultimately owned by politically exposed individuals involved in wide scale corruption, which was allowing an autocratic regime’s officials to become rich at the expense of its people. This particularly shocking case shows in dramatic fashion the huge importance of investigating the ownership structures of your partner organisations and not just the company you wish to trade with.  

In this case the company looked “squeaky clean” but was found to be ultimately owned by malicious shareholders or, in many instances through a web of shell companies. Trading with these companies could destroy your reputation overnight, through inadvertently aiding their activities.

At GWCI we undertake these checks on a regular basis so if you have any doubts about current or prospective clients, we can assist wherever they are in the world.

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