www.pwc.com Intella - automated solution for third party checks A quick way to learn more about your business partners 28 January 2016 Question for voting 1 1. How many third parties (suppliers, customers) does your company have (on average annually)? / С каким количеством контрагентов (поставщиков, клиентов) работает Ваша компания (в среднем в год)? 100-500 51% 2. 500-1,000 3. 1,000-3,000 4. More than 3,000/Более 3,000 23% 5. Don’t know/Не знаю 10% 10% 5% 1. PwC 2. 3. 4. 5. Question for voting 2 How does your company conduct background checks on third parties prior to contracting? / Каким образом в Вашей компании проводится проверка благонадежности контрагентов до заключения контракта? 1. Collect registration documents/Собираются регистрационные документы 54% 2. Collect registration documents and conduct adverse internet searches/Собираются документы и проводится проверка на негатив в интернете 41% 3. Conduct enhanced due diligence/Проводится полная проверка благонадежности 4. More than one of the above/Более одного из вышеперечисленных 5% 5. No checks performed/Не проводится 6. Don’t know/Не знаю PwC 0% 1. 2. 0% 3. 4. 5. 0% 6. Question for voting 3 Does your company update results of initial checks on third parties? / Обновляются ли в Вашей компании результаты первоначальной проверки? 1. Yes, regularly (every month/quarter/year)/ Да, регулярно (каждый месяц, квартал, год) 52% 2. In some cases/ В некоторых случаях 33% 3. No/Нет 4. Don’t know/Не знаю 9% 1. PwC 2. 3. 6% 4. Intella Overview CI automated tool is a solution aimed at helping clients to quickly identify potential risks (operational, tax, reputational, financial and conflict of interest risks) when dealing with a large amount (hundreds, thousands) of third parties in Russia. It has two modules allowing run two streams of analysis: Risk assessment Related party check Intella - automated solution for third party checks PwC is the assessment of your business partners towards various risk criteria. is a check which allows you to identify links at various levels of ownership and relationship. Main functions Collects information on third parties from different sources Structures collected data into a table for further analysis Screens each business party against various risk criteria Identifies corporate links between business parties and with employees Visualises results and relevant links identified January 2016 5 What for? This is what you usually know about your third parties Name Having checked your third parties with Intella you would know that Intella - automated solution for third party checks PwC Turnover Date of contracting Responsible person 5 clients filed for bankruptcy in the last six months You are the only client for 6 of your suppliers 15 suppliers have features of shell companies 10 suppliers registered less than four months before the date of contracting 12 clients came to the attention of tax authorities 10 of your business partners may be potentially affiliated with your employees January 2016 6 Intella What for? to identify and avoid dealing with unreliable third parties to avoid potential conflicts of interest by checking whether your employees are affiliated with any of your third parties Intella - automated solution for third party checks PwC to reduce fraud risks and losses to monitor important changes happening with your business partners which can impact your business January 2016 7 Intella How it works 1 Obtain a list of INNs of your counterparties 2 Obtain a list of your employees 3 Upload both lists in the tool 4 Press the button to run the analysis 5 Obtain the results 6 Provide recommendation on further steps Intella - automated solution for third party checks PwC January 2016 8 What are the sources of information used? …to identify key principals and registration data We obtain the following information from the corporate databases: registration dates, general directors, shareholders and other key data. Corporate records Tax Authorities watch-lists Types of sources of information …for history of operations with particular companies and names of employees subject to affiliation checks We retrieve data such as the initiation of relationship, names of Client’s employees and other information. Intella - automated solution for third party checks PwC Client information Competition body watch-list …for shell company indicators The Russian Tax Authorities maintain a number of watch-lists which help to identify companies that have features of bogus or shell companies. Such lists include disqualified directors, companies are not reached at the legal address, nominal directors/shareholders. …for violations of competition laws in public procurement A list of unreliable suppliers includes companies which have violated tendering procedures during public procurement, including indicators of bid rigging. January 2016 9 Small retail bank Issue What Intella Did Result • A small retail bank is controlled by two groups of shareholders. • Collected all the corporate data in relation to 100 borrowers and around 10 suspicious companies. • Client obtained evidence that some of the borrowers were indeed connected directly or indirectly with managers and other shareholders. A number of major construction and development projects was financed through these entities. • Our Client - one group of shareholders - had a suspicion that some of the borrowers were affiliated with the other group’s of shareholders and, possibly, management. • In addition, the Client identified some suspicious companies in the bank’s loan portfolio and sought to understand whether they are connected with the bank’s management. Intella - automated solution for third party checks PwC • Checked for affiliations between borrowers/ suspicious companies and 2, 000 of the bank’s employees senior management other group of shareholders. • Client obtained a better understating of the structure of its loan portfolio, including shell companies, companies affiliated with managers and other suspicious companies, and was able to decide on further actions, including provision adjustments. January 2016 10 Affiliation checks results Нow the raw data looks Intella - automated solution for third party checks PwC January 2016 11 Food company Issue What Intella Did Result • A Russian food company has a large portfolio of suppliers (several thousands). • Collected the following corporate data in relation to all the suppliers: • Client identified which counterparties represent risks. 1. Former directors and shareholders • Evidence was found that some of Client’s suppliers are owners of its suppliers or associated with suppliers through relatives. • Basic checks on each counterparty are conducted by its Security Department. However, there is no clear understanding of the structure and content of its suppliers base. • Client sought to identify whether there are links between the whole population of its suppliers and 50,000 of its former and current employees. • Client wanted to conduct an overall risk assessment of all of its suppliers to identify which of them require immediate action. Intella - automated solution for third party checks PwC 2. Current directors and shareholders • Checked for affiliations with employees and their relatives. • Screened all the counterparties against various risk indicators. • Client initiated a further review to identify: What was the rationale behind involving such suppliers? Are the terms with such suppliers commercially advantageous or otherwise? Are there any indicators of fraud? January 2016 12 Affiliation checks Links identified Intella - automated solution for third party checks PwC January 2016 13 Risk assessment Example of results # Tax number Name Annual turnover 1 3135186957 ООО Business partner 1 5,932,619 2 4512843629 ООО Business partner 2 5,366,785 3 8541092226 ООО Business partner 3 4,779,861 4 5785092521 ООО Business partner 4 5,090,670 1 2 3 4 5 Business partner is dissolved Business partner is under administration or bankruptcy proceedings Business partner is undergoing reorganisation Business partner did not submit tax report for the last year Business partner has tax arrears exceeding RUB 1,000 at the date of check Breakdown of risk indicators by number of business partners Risk distribution Immeditate risk 5% Business partner's general director or shareholder is nominal 2% 8% Low risk 6% 1.1% 1. High risk Business partner is not accessible to the Tax Authorities by its legal address Business partner has tax arrears exceeding RUB 1,000 % of Total number of business partners 6% 6,0 10,0 % of Total turnover of business partners Medium risk 32,0 Business partner is undergoing reorganisation 46,0 Business partner is under administration/bankruptcy proceedings Business partner is dissolved PwC 5,0 Busienss partner did not submit tax report for the last year 5% Intella - automated solution for third party checks 21,0 Recently registered business partner 50,0 20,0 January 2016 14 To summarise Key features of Intella Experience shows that it • Automated and quick • Applicable to all industries • Multifunctional risk assessment and affiliation check • Allows you to check all types of third parties – suppliers/clients • Advanced reporting (from tables to visualization) Intella for Kazakhstan will be completed soon Intella - automated solution for third party checks PwC January 2016 15 Questions? Marina Zvyagintseva Manager, Forensic PwC Russia Mob.: +7 926 319 30 46 email@example.com Настоящий документ подготовлен исключительно в качестве общего руководства по вопросам, представляющим интерес, и не является профессиональной консультацией. Информация, содержащаяся в данной публикации, не может служить основанием для каких-либо действий, предпринимаемых без предварительного обращения к профессиональным консультантам. PricewaterhouseCoopers LLP не дает никаких подтверждений и гарантий (явных или подразумеваемых) относительно точности и полноты информации, содержащейся в данной публикации. Если иное не предусмотрено законодательством, PricewaterhouseCoopers LLP, ее члены, сотрудники и представители снимают с себя всякую ответственность и отказываются от обязательств перед любым лицом за использование данной информации и отказ от ее использования, а также любые решения, принятые на ее основании. © 2016 ООО «ПрайсвотерхаусКуперс Консультирование». Все права защищены. Под "PwC" понимается ООО «ПрайсвотерхаусКуперс Консультирование» или, в зависимости от контекста, другие фирмы, входящие в глобальную сеть PricewaterhouseCoopers International Limited (PwCIL). Каждая фирма сети является самостоятельным юридическим лицом. PwC в России (www.pwc.ru) предоставляет услуги в области аудита и бизнес-консультирования, а также налоговые и юридические услуги компаниям разных отраслей. В офисах PwC в Москве, Санкт-Петербурге, Екатеринбурге, Казани, Новосибирске, Ростове-на-Дону, Краснодаре, Уфе, Воронеже, Южно-Сахалинске и Владикавказе работают более 2 500 специалистов. Мы используем свои знания, богатый опыт и творческий подход для разработки практических советов и решений, открывающих новые перспективы для бизнеса. Глобальная сеть фирм PwC объединяет более 195 000 сотрудников в 157 странах. Бренд PwC объединяет фирмы, входящие в глобальную сеть фирм PricewaterhouseCoopers International Limited (PwCIL). «PwC в России» означает фирмы сети PwCIL, осуществляющие деятельность в России.