March 14, 2012 / 12:56 AM / 8 years ago

Corporate intelligence firms follow U.S. graft probes to Asia

HONG KONG/WASHINGTON (Reuters) - As anti-corruption cops from U.S. law enforcement agencies train their sights on Asia, the booming corporate intelligence business is not far behind.

Two specialist firms have opened Hong Kong offices this month, transferring top executives from London and Washington. Industry experts say more will follow, as demand grows for people with the skills to guide companies through doing business in Asia amid a rapid rise in the number of corruption prosecutions.

The work itself is not new — investigations firm Control Risks has been in the region since the 1980s — but the uptick in demand for it is.

“Undoubtedly the biggest driving factor is the increase in anti-corruption legislation and the heavy penalties that are imposed if those rules are breached,” said Rebecca Palser, who moved from London to head Risk Advisory’s Hong Kong office, which opened this month.

Robert Boyd, who heads the Southeast Asia practice for Control Risks, said work at his firm, which helps clients deal with fraud, extortion and security threats, had “outpaced even the stellar GDP growth and foreign direct investments numbers” in Asia.

Services offered by the growing number of investigative or intelligence firms in Asia include role-play training sessions on how to respond when asked for a bribe, and consultancy on how to negotiate with a kidnapper. They also help clients carry out background checks on people and companies.

Investigative outfit Nardello & Co, founded by former U.S. federal prosecutor Daniel Nardello, also opened its first Asian office in Hong Kong in March.

Nardello’s outfit, whose clients include FTSE 100 and Fortune 100 companies, said the greater efforts U.S. authorities are making to enforce anti-bribery law the Foreign Corrupt Practices Act (FCPA), are bringing clients to its door.


Since 2002, the United States has brought 46 FCPA enforcement actions related to corruption in China, second only to those involving Nigeria.

As part of their defence against FCPA actions and those under similar British and European regulations, companies hire investigative firms to work with lawyers on internal probes when they find evidence of suspicious activity, or when they want to vet a potential supplier or takeover target.

“(Asia) is ... a culture that is not unfamiliar with corruption and being corrupted, at least in terms of how the West defines it,” said Nardello, whose firm also helps defend executives charged with FCPA offences.

There are plenty of recent cases where a Western firm’s conduct in Asia has brought the lawman knocking.

Wynn Resorts (WYNN.O) (1128.HK) and its largest shareholder, Kazuo Okada, have exchanged accusations of bribery involving casinos in Macau and the Philippines, triggering investigations on both sides of the globe.

Prosecutors are also currently examining whether Avon Products (AVP.N) paid bribes to win the first-ever license given by China to a Western company to sell products door-to-door.

The sums of money in question don’t have to be massive.

In a recent presentation about the risks companies face under the FCPA, Gibson Dunn identified traditional celebratory packets — red envelopes stuffed with cash— and less obviously, mooncakes, as potential “things of value” that could put recipients in trouble.

In China, such gifts are expected to be given in both corporate and personal life — meaning companies have a fine line to tread between staying on the right side of their business partners, and the right side of the law.

Allan Matheson, managing director at Blue Umbrella, a Hong Kong firm that provides due diligence reports on companies and individuals across Asia, said many of its clients have shifted attention from other markets to spend more time and resources managing risk in the region.

“We think the next big wave of growth will be in helping the increasing number of Asian companies implement measures to enhance corporate governance and transparency as they expand overseas,” he said.

Editing by Daniel Magnowski

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