Insights & Reports > Kroll Global Fraud Report

It is a sad reality of doing business in many parts of the world that compliance has not, until very recently, bothered some corporations a great deal. Indeed, I remember being told at a local competitor’s office on my second day in India, in no uncertain terms, that Kroll would never have a successful business here because “people don’t give a damn about fraud and corruption” – except that it was expressed rather more colorfully.

Of course, our competitor was wrong. Increasingly, people do give a damn. This is essentially why Kroll reestablished its Mumbai base two years ago. Nevertheless, endemic corruption, lack of compliance, and a frequent disregard for international corporate governance norms are problems wherever they exist, and they probably stop some investors from taking risks in India.

As head of Kroll’s intelligence services in India, when asked about the hardest part of this job, one answer I give is “delivering bad news to clients.” So, what happens when we give clients a host of scary reasons not to do business with a given local company? Naturally, they ask whether we are sure. How bad is it? How can we be certain? Part of our job is to add context – to nuance and explain. Very often, though, discreet investigations, focused on compliance, reputational, ethical, and governance issues, make depressing reading.

Our experience in India has been that we have had to think beyond simply delivering the bad news. We have had to consider where this leaves the client. If we have just potentially sunk an exciting opportunity, do we simply walk away?

We decided that we owed our clients more. We wanted to work through compliance issues with them. Thus, we came up with the philosophy of extended due diligence.

There is no template for extended due diligence. Typically it involves, after delivering unpleasant news, discussing with clients how bad things might be and, between us, developing a plan outlining the next steps.

An unfortunate reality in India is that almost any line of business involving land, or the granting of a license, will very likely involve some kind of corrupt practice. Kroll will always remain independent, so in some instances, it may be appropriate to approach the subject directly to ask questions and verify information. If appropriate, we may even present the latter with intelligence we have already acquired through discreet methods. This is not a lengthy process, but can be shatteringly effective in either justifying our clients’ concerns or, just maybe, explaining business practices so that our clients are satisfied that a risk is acceptable.

Where our compliance checks suggest too great a risk in a given deal, we will also help clients who decide to return to the drawing board. If they are looking to make a significant investment in a particular sector, we are well equipped to do the initial leg-work. Using our networks throughout India, we are in a good position to help seek investment targets, while at the same time conducting a preliminary compliance due diligence to ensure that there are no nasty surprises down the road.

These suggestions are not exhaustive. The point is that a negative, compliance- focused due diligence investigation is not the end of the road. Even in a market where corruption is a genuine problem, we can very often work out creative solutions with our clients.

Richard Dailly is a managing director for Kroll’s office in Mumbai. He has many years of experience working in international politics and political risk for the British government and Kroll. Richard has a deep understanding of investigative and intelligence techniques and analysis, in support of corporate investigations, due diligence, political risk and litigation support.