Below is a list of potential red flags to look for when reviewing a transaction for corruption risk. While this list should not be considered exhaustive, it should provide a good starting point for assessment of relative corruption risk.
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Lack of written agreement; non-standard, very old, and outdated agreement; or needlessly complex agreement |
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Uncommonly high commission rate or unusually large fees compared to the typical compensation paid for similar type of work in the region or compared to the amounts paid to other third parties on similar deals |
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Specific third party required or recommended by customer or other party |
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Lack of experience, capitalization, resources, or staff to support type of vendor work/engagement |
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Third party does not appear to be a legitimate company, is unregistered, or has been in existence for less than one year; has no independent references and/or no physical office |
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Third party is (or is related to) a government official or promotes its close connections to government officials/agencies |
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Insufficient information available through due diligence (governmental relationship, credit, experience) or lack of cooperation in due diligence |
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Refusal or reluctance to complete requested certifications |
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Third party appears in negative news or is subject of a government investigation or enforcement action, or references illegal activities |
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Payments into offshore accounts or to locations not related to the deal |
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Use of petty cash or other poorly documented/loosely tracked slush funds (e.g., marketing funds) |
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Inadequate, generic, or otherwise questionable descriptions of activities; requests for changes to invoices or documents |
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Missing or incomplete documentation |
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Repetitive payments of same amount or round dollar amounts |
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Substantial large-dollar transactions for a new vendor |
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Delegation of work by third party to multiple agents or subcontractors |
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Invoices paid too quickly; payments in cash or check, payments in advance |
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Large individual or aggregate payments/benefits to one payee |
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Repetitive entertainment/dinner/travel/gifts or requests for the same, or requests for donations and contributions |
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Employees being paid who are not listed in recent company phone book or who receive no benefits, tax withholding. |