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Author: James Swenson, Managing Director, Ethixbase
Addressing Bribery and Crime Risk in Aerospace
Aerospace companies are particularly exposed to bribery and corruption due to the high percentage of state ownership in the sector, the industry’s heavy reliance on public procurement processes, as well as the need for third parties in various parts of the world, specifically in countries with a high risk of corruption.
Aerospace is the fifth-most investigated industry by the US government for potential violations of the Foreign Corrupt Practices Act (FCPA). While issues in the industry were the catalyst to the creation of the FCPA in the first place in the 1970s, 12 percent of FCPA enforcement actions have involved airlines, aerospace manufacturers, suppliers, and service companies since then, second only to the oil and mining industry, according to a prominent law firm.
Employees from state-run aerospace companies are considered foreign officials and enforcement activity has uncovered improper payments made to governmental and non-governmental executives to gain unfair advantages. Recent anti-bribery enforcement showed that European regulators are just as much focused on corruption in Aerospace as their US counterparts.
Risk Mitigation in Aviation
To mitigate against these risks, and associated penalties and reputational damage, aerospace companies should ensure they have proper risk assessment procedures in place, particularly for third parties that facilitate the distribution of the products and services into government-run systems. Once identified, conducting enhanced due diligence (EDD) on high-risk third parties forms part of a robust compliance program and can instill confidence in potential third parties that do not have a history of financial crime.
In addition to bribery and corruption, aerospace companies should utilize their due diligence programmes to mitigate against other common risk factors in the industry including:
- Foreign government involvement
- Political donations
- Political exposure of management and ultimate beneficial owners (UBOs) of a third party which may increase corruption and collusion risk
EDD reports help better understand the reputation of a third party through detailed research and background analysis including analysis of available public records, unwrapping corporate entities to UBOs, conducting thorough local language adverse media to identify risks, and understanding litigation/enforcement history.
Discover the Ultimate Beneficial Owner (UBO) of your third parties using Enhanced Due Diligence Reports. Our expert analysts will uncover these elusive insights which can prove invaluable to your risk analysis and supply chain decision-making processes. Take Action.
