Maria Butina, junior associate of White-Collar Crime, Compliance and Investigations practice at Miller Law Firm
Even the whitest and most transparent entrepreneur today is not immune to business persecution and the attention of law enforcement agencies – the police, the SBU, the BES, the NABU, the SBI, or the prosecutor’s office.
Therefore, one of the least controllable risks is the risk of criminal prosecution, even if the company is operating legally. It is enough for a “problematic” counterparty to appear in the supply chain, and there are already grounds for inquiries, inspections, and sometimes searches.
And it doesn’t have to be your direct counterparty – a problematic supplier of your partner or even a third party is enough. Tax evasion, financing of sanctioned companies, deliveries to the temporarily occupied territories or to the Russian Federation are possible, and all this story already affects you.
To avoid this, it is worth knowing in advance what steps a business can take to minimize such risks. This checklist provides specific advice on how to prepare and protect your company before there is a knock on the door:
Check your counterparties:
It is actually very important to do this at the beginning of cooperation with any supplier, subcontractor, etc. It is enough to be in the supply chain or cooperate with a company that has become a subject of criminal proceedings and you have the risk of a search at your company.
Therefore, we check the following:
- Mentions in criminal cases (through the Unified State Register of Court Decisions, as well as media and social networks);
- sanctions (in the State Register of Sanctions);
- ties with the occupied territories or the Russian Federation and tax debts or questionable financial transactions (in online services).
But it’s important not to use automation alone. In most companies, the compliance check of counterparties ends when a financier, compliance officer, or in-house lawyer runs them through the platforms once. But in practice, this does not reduce risks; on the contrary, it creates the illusion of security.
Real verification is an additional touch of a live professional in the form of OSINT, business intelligence, and most importantly, conclusions about risks and specific recommendations.
That is:
- analysis of indirect connections of beneficiaries (through offshore companies, friendly companies, related parties);
- analysis of public mentions in the media, including regional and specialized ones;
- use of professional, specialized software and intelligence tools that can detect cross-profiles, digital traces, and involvement in non-obvious cases;
- search through non-obvious and paid sources (for example, registers of other countries if the activity has a cross-border element);
- analysis of the counterparty’s behavioral style through interviews with previous partners, if it is a large contract.
The final risk assessment should not be made by an algorithm, but by a person with experience who is able to see signals that remain outside the open databases.
Formalize relationships with counterparties:
Anything that is not recorded does not exist: in today’s realities, even a screenshot of a messenger message where you agreed on the terms of the agreement can be important evidence in the event of a criminal case or a lawsuit. But it’s better not to take any risks – don’t conduct any critical negotiations only “in words.” All key agreements should be in writing.
This is your insurance, so:
- all key agreements are to be made in writing;
- write clear contract terms, detail everything: cost, limits of liability, communication (in what form it takes);
- keep correspondence and records of negotiations (with the consent of the parties).
Have your own lawyer on staff or “on call”:
Not “in case of problems,” but as an element of your business security system that should work proactively, not after you have already received a summons for interrogation or a search.
Your lawyer will be there:
- know the specifics of your business – understand your internal processes, risks, and weaknesses;
- participate in key negotiations or review important contracts before signing;
- instruct your team in the event of law enforcement requests, searches, and interrogations.
- will be in touch 24/7 and have a clear system of response in critical situations.
Conduct training as a team:
In critical situations, such as a search, a subpoena, or a request from law enforcement, employees’ responses should not be improvised, but rather a well-established algorithm. Wrong actions or unnecessary words can cost a company its reputation and money, so
conduct practical trainings from time to time, for example, “how to act during a search” and develop an algorithm:
- who opens the door and checks documents with law enforcement officers;
- who is the first to call a lawyer;
- who is authorized to officially communicate with law enforcement on behalf of the company.
Work carefully with public funds:
If your business deals with public funds (participates in public procurement), you should understand that you are constantly exposed to risks. However, if you understand these risks, you can effectively manage them.
Always pay attention to the following and do not participate in the procurement if:
- the customer’s overestimation of the cost of services or works: If the price is too low, it is understandable that suppliers will be absent and tenders will be canceled. The same cannot be said for overpricing, as it leads to the purchase of goods or works at inflated prices and entails budget wastage;
- discrimination against bidders: conditions or requirements that deliberately create an advantage or limit the opportunities of specific bidders. This makes it impossible to compete fairly at auctions and creates an unfavorable environment for business;
- you are being extorted for kickbacks: participation in such a conspiracy is a serious corruption risk;
- collusion between bidders: collusion between bidders is a serious violation of competition law and can have serious legal consequences for bidders, including administrative fines, lawsuits, and loss of reputation.
Conclusion:
Today, the law enforcement system does not always work selectively, but often in a “roundabout” manner. Even if your company has not committed any violations, this does not mean that you will not be subject to inquiries, searches, and interrogations.
The risks of criminal prosecution do not disappear on their own – they need to be managed. And the most effective way to do this is to check your counterparties, document agreements, have a trained team and a lawyer in touch.