UK Trade and Investment (UKTI) told the reporter, who was posing as a businessman, to obscure directors’ criminal records to circumvent regulations and admitted that British embassies are available for hire to impress would-be customers.

An adviser representing UKTI, which the Duke of York represents as a “business ambassador”, said that a director with a criminal past could be taken off company records and replaced with another name to avoid breaching accreditation rules for firms selling abroad.

He also boasted that Embassy and High Commission buildings were available, at a price, to give a “perception” that a company was endorsed by the British Government.

His comments were secretly filmed by Heydon Prowse, the film-maker whose investigations led last year to the sacking of Alan Duncan, the Tory frontbencher, after he was caught on video claiming MPs were “living on rations” after the expenses scandal and that they had been “treated like —-”.

The UKTI said it was taking the allegations “extremely seriously” and was considering launching a full investigation.

Prowse posed as the boss of “Frank Arthur Security”, a fictional firm which claimed to offer ex-British Army servicemen as private security guards.

He confided to a UKTI international trade adviser that his co-director had a criminal record which could cause problems when accrediting the firm.

Mike Gavin, the adviser, said: “If you’ve got different directors, different directors can be put on the accreditation. So things can change and you can avoid them. It’s not the end of the world.”

The British Association of Private Security Companies requires its members to prove that directors have no convictions, and the Iraqi Ministry of the Interior requires similar guarantees from any private security firm working in their country.

Mr Gavin also advised the fictional firm on how it could draw on a range of commercial services offered by British embassies.

“You can also use that embassy to present your company. So you can invite people to a reception or a presentation. Again, you pay for the room but it’s all arranged for you,” he said.

“There is a perception that you’re endorsed by the government because it’s a government building. Of course it’s —-, we don’t.

“All we do is due diligence to check that you’re not going to appear in the Telegraph on Sunday embarrassing the hell out of the British Government.”

He explained that in countries such as Nigeria using the embassy was the “easiest way to get everybody together”.

Prowse asked: “Because of the security situation?”

Mr Gavin replied: “No, because in places like Nigeria they love to show off that they have got this card from the British Embassy, it’s got Ambassador invites, British Government logo and they say ‘Look I’m going to a garden party’.

“It’s all ——–, but everybody in Nigeria wants one because they want to be seen getting out of the car, going into the High Commissioner’s office.

“It’s all perception and that’s part of what you don’t have at the moment.”

The £323-million-a-year UKTI was formed from two other bodies in 2003 and reports jointly to the Foreign Office and the Department for Business, Innovation and Skills.

Its website advertises the services it offers to British companies and says: “Sometimes it’s just pure luck that helps your company win its first overseas contract. And sometimes it’s not.”

The Duke of York has been Special Representative for International Trade and Investment since 2001, previously representing the bodies which merged to form UKTI.

Last year he was criticised for spending £140,000 on hotel bills, food and entertaining, plus £435,000 on travel.

The Duke’s supporters mounted a PR campaign to try to justify his expenses, claiming that he had played a role in winning contracts worth £3 billion for British companies, including a £2.43 billion contract for Airbus and Rolls-Royce from AirAsia which came about as “a direct result of his lobbying”.

In a meeting with Prowse, which was filmed with a buttonhole camera, Mr Gavin also stressed the benefits of a contacts service offered by the organisation’s officials in British embassies.

“They are tasked to ring that guy up, send them out your brochure. And then they will arrange an appointment for you,” he said.

“Rather than ringing them up [yourself] and not getting past the receptionist, most people think ‘What the bloody hell does the British embassy want?’ and will at least answer the phone.

“Then it’s the guy’s or the commercial officer’s … task to get them interested in what you do and arrange an appointment. They can’t guarantee it but I’ve used that in many different countries and it works.”

Mr Gavin, who works in the UKTI’s London-based international trade team, suggested that Afghanistan could be a source of short-term contracts but warned that the country’s situation would deteriorate rapidly after the “Americans pull out in 18 months’ time”.

He predicted that “no one is going to want that —-hole any more” and that the US would be forced to negotiate with the Taliban.

He also advised that Algeria could be a “gold mine for a lot of companies” but warned that it was “God damn dangerous”.

The adviser told Prowse that corruption in Africa may mean having to pay bribes, but suggested he should “walk away” from such situations.

“If you’re doing business in Africa, sod’s law there’s going to be some corruption in it somewhere and you may have to bung someone. We don’t want to know that. We don’t want to get involved in it.

“And I would if I was you walk away from it. It’s just not worth it. One, if you get caught here you can go to prison and, two, do you want the hassle of not being paid?”

Last year a report by the National Audit Office found that most exporting companies represented by UKTI said it made little or no difference.

The poll found 40 per cent of companies felt the quango made “no financial benefit”, while another 29 per cent had no idea whether the body was any financial help at all. Just 30 per cent said UKTI “made some financial benefit” to their trade.

A UKTI spokeswoman said: “UK Trade and Investment takes these allegations extremely seriously.

“We would never condone the obscuring of criminal records. And, while Embassies are legitimately used to promote British business abroad, we would not condone this being misrepresented as official endorsement.”

She added: “The person named is not a civil servant and not a member of UK Trade and Investment staff, but is a contractor employed by one of UKTI’s delivery partners.

“We are making our own enquiries and, if appropriate, we will carry out a full investigation.”

Oliver Sprague, a spokesman for Amnesty International UK, said: “Private military and security is a serious business that needs proper regulation – we are talking about men with guns.

“Yet the UK government has already rejected proposals that the industry should be regulated by law, saying that self-regulation will be enough.

“If this is their idea of how it should work – with government advisers helping companies to get around the rules – then heaven help civilians in the countries where these companies operate.

“A body like the UKTI should certainly not be offering to help companies exploit legal loopholes. We need to improve the regulation of this industry, not undermine it.”

The investigation was conducted by Prowse and John Green as part of the Don’t Panic Quango Awards which features in the Yahoo! website’s election blog.

By David Barrett and Robert Mendick

A key role for Human Resources and Security in any company is the background screening of not only US based employees, but also of overseas employees, customers, suppliers, vendors, agents and other business associates. HR and or Security are usually on the front lines of such activities, although it may be in conjunction with the Legal or Compliance Department.

We are frequently asked by clients what is considered best practice when it comes to international employee screening. The short answer is that it depends. When asked we try to understand specifically what the organization is trying to accomplish, what sort of compliance requirements are they looking to meet that is relative to their business, and finally what are the countries involved?

A client recently asked what we consider best practice for International Background Checks as it related to complying with the (“FCPA”). The client had recently been the subject of enforcement action after it was discovered that the company’s drilling equipment was found in a sanctioned country. It was also discovered that the company had engaged local independent agents from the sanctioned countries without performing proper background checks. Talk about getting caught with your hand in the proverbial cookie jar! We were asked to help come up with a solution to fix this problem and to limit the chances of it happening again.

In order to drawl, a set of best practice guidelines about this subject its important to have an understanding of what the FCPA is and how it applies to human resources. Then it’s a matter of developing a method and a set of processes that will enable an organization to meet the required outcome there by meeting compliance requirements.

Foreign Corrupt Practices Act

The FCPA is a federal law that prohibits offering, promising, or giving anything of value, as well as authorizing such an offer, promise, or gift, to a foreign official for the purpose of obtaining, retaining, or directing business to a person or entity. This prohibition is contained in the FCPA’s anti-bribery provisions, which are enforced by the DOJ. The FCPA’s anti-bribery provisions have a much broader reach than many other U.S. laws. U.S. corporations can be liable for conduct that occurs entirely outside the United States and multinational corporations can be liable for conduct that bears only a tenuous connection to the United States. This includes employees of overseas subsidiaries, customers, suppliers, vendors, agents and other business associates.

With the number and size of penalties increasing, the Foreign Corrupt Practices Act (FCPA) is causing many U.S. institutions to look into how they evaluate all of their relationships overseas. The lack of a due diligence of a company’s agents, vendors, and suppliers, as well as merger and acquisition partners in foreign countries could lead to doing business with an organization linked to a foreign official or state owned enterprises and their executives. This link could be perceived as leading to the bribing of the foreign officials and as a result lead to noncompliance with the FCPA. Due diligence in regards to FCPA compliance is required in two aspects:

1.       Initial due diligence - this step is necessary in evaluating what risk is involved in doing business with an entity prior to establishing a relationship and assesses risk at that point in time.

2.       Ongoing due diligence - this is the process of periodically evaluating each relationship overeas to find links between current business relationships overseas and ties to a foreign official or illicit activities linked to corruption. This process needs to be performed indefinitely as long as a relationship exists, and usually involves comparing the companies, executives, and other business associates to a database of foreign officials that may be classified as “Politically Exposed”.

While financial institutions are among the most aggressive in defining FCPA best practices, manufacturing, retailing and energy industries are highly active in managing FCPA compliance programs.

Suppose a multinational company has a compliance and ethics policy and tells its employees not to pay bribes - is that enough, or should the company go further? 

A clear corporate policy against paying bribes is important, as well as including explicit language in every employment and agent agreement that prohibits bribery, but it is also critical for companies to conduct thorough employment and pre-engagement background checks on their agents and other third parties.

Certainly, U.S. government regulators expect nothing less. In a February 2009 FCPA settlement (for $579 million) by KBR and Halliburton with the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ), the SEC criticized Halliburton’ s due diligence policy and practice and its failure to conduct any due diligence on one particular agent in Japan. If the government shows up at your door asking to see the files on your overseas employees and trading partners, you want to be able to produce sufficient documentation to demonstrate you’ve looked thoroughly at the background and reputation of these individuals before engaging them to work on your behalf. According to the Federal Sentencing Guidelines for Organizations (FSGO), §8B2.1. (b)(3). “The organization shall use reasonable efforts not to include within the substantial authority personnel of the organization any individual whom the organization knew, or should have known through the exercise of due diligence, has engaged in illegal activities or other conduct inconsistent with an effective compliance and ethics program.”

On the other hand, if you open your background check file to the government and it is empty or thin, the organization is going to be in a challenging situation. In the event a FCPA violation is uncovered, it is increasingly apparent from past cases that the government is far more likely to be lenient on a company that has a commitment to an anti-bribery compliance and ethics program, including being able to demonstrate the organization has exercised a responsible level of due diligence on their overseas employees and related business associates.

What sort of checks should be done to meet FCPA requirements on overseas employees and business associates?

As with any background check program, we are looking for any “red flags” or “signs” such as discrepancies in the individual’s background that could show a pattern of misconduct. First, we validate the individual’s identity to confirm the individual is who they say they are. When dealing with foreign national candidates, this can be accomplished by performing a local ID validation of the individual’s government issued identity documents such as a passport or other local national identity documents. A search of Restricted Parties and Blocked Persons is checked to determine if an individual or business entity may be on a list of sanctions, known fraudesters, terrorists, money launderers, OFAC or consolidated lists, or even linked to politically exposed persons.

We would conduct an international criminal record check on the individual from countries they’ve resided. Be aware the time required to undertake an overseas criminal record check may take much longer than what you may be accustomed to and that criminal data may be limited from some countries due to local legal provisions governing access and privacy as well as the quality and availability of local records may be rather different than what you would expect from the U.S. It is, however, important tonote that even though costs may be higher and access to local criminal data may be limited, organizations still need to be able to demonstrate that they applied a reasonable level of due diligence based on local available means. When researched properly, the end result from many countries should be an official document issued from local authorities attesting to the individual’s criminal history. These are sometimes called “Good Conduct Certificates”, “Police Clearance Certificates” or “Certificate of No Conviction”.

If and when a local criminal record check may not be possible due to local legal provisions or the quality of data may be limited we would have the candidate provide a copy of their own “Good Conduct Certificate” for authentication. Most Police Clearance documents are printed on security paper and contain sequence numbers that can be authenticated through the issuing agency. This is known as a Police Clearance Authentication. Results should then go in the individual’s background check file as a matter of record. Examples of some of the “red flags” we have uncovered involve a US defense contractor who was sourcing contingent workforce options. All of these individuals initially provided what appeared to be legitimate clearance documents indicating they had no criminal record. Convictions of white slavery, homicide and employment fraud were uncovered on several in country Filipino staffing agencies and their principles. Suffices to say organizations should never entirely rely upon the authenticity of provided documents without the benefit of verification. The defense contractor opted not to do business with the questionable staffing firms.

Next look to confirm whether the entity (either individual or company) has a real business track record and experience in the particular industry for which they are being engaged. Personal and professional reference interviews, and overseas employment verifications, allow us to assess the reputation and business practices, integrity, and the possibility of any history of questionable activities. Academic and professional credential verifications allow us to verify the individual in fact received and was awarded claimed certifications. Civil history searches and or consumer credit checks are also done where available to asses past civil cases and possible financial liabilities.

International Business Reports can be accomplished on overseas trading partners. Business reports include business background information, details about a company’s credit risk ranking, banking and finance validations, verification of trade references, property, assets, legal filings, structure, key personnel, payment behavior and financial assets and liabilities along with standard “Know Your Customer Checks” such as a search of Denied, Debarred, and/or Restricted Parties to include media searches on the actual company. We then examine the individual owners/directors/principals of a company to identify any connections to or relationships with local government, political, or military officials. A search of politically exposed persons can uncover this type of information. And finally, determine if the company is licensed to do business in the country.

The Role of Human Resources

Now more than ever regulatory compliance has understandably become one of the most important topics for companies operating in the modern business environment. For these companies it is important to ensure not only that they are acting in accordance with national and international regulations, but also demonstrate that they have undertaken reasonable levels of due diligence in this respect. The penalties for non-compliance with these regulations can include prison sentences and severe fines. Beyond this, there is also the risk of bad publicity and the possibility of inclusion on one of the denied-party lists. If, for example, a European company were to be included on one of the US denied-party lists it could effectively result in that company being unable to trade with the US.

A CPIC (Canadian Police Information Centre) Policy Change has been communicated to all police services across Canada, with changes to be implemented immediately, and which affects all members of the employment and volunteer screening industry in Canada. 

Based on a bulletin from CPIC, we understand that we will ONLY be able to supply you with a very basic “Criminal Record Check” result, which will say that “Based on the information received, there is no criminal record identified.  Information can only be confirmed by fingerprint comparison”.

When a possible positive response is received:  “There may or may not be a criminal record in existence.  Information can only be confirmed by fingerprint comparison”.   

However, the reality for our industry effective immediately is as follows:

1. We can no longer supply Details of Criminal Convictions.  Police Services have been told that they cannot release a detail of a record to anyone without fingerprint comparison.  
2. We can no longer provide VSS checks (Searches for Pardoned Sexual Offences).  VSS Searches are only allowed if the person physically appears in person at the police station.  If a VSS Request is sent in, we will only process a Criminal Record Check.  Bear in mind that VSS searches only for Pardoned Sexual Offences, which historically are only revealed in about 1 in 20,000 cases. 
3. We will no longer process checks anyone under age 18.  So that you can maintain a consistent process, we recommend that you still send in the file, and we will not charge for requests that come in for persons under 18 years of age.

These changes are in direct response to this week’s directive from the CPIC office within the RCMP in Ottawa, which was sent to our police partners. 

What is happening now?

1. We are working to find other alternatives that respect the CPIC policy directive in order to supply you with information that will let you make timely hiring decisions. We will keep all of our clients updated as we develop alternatives.  Options we are exploring include Freedom of Information requests, which are governed under federal and provincial legislation. Please bear with us as we grapple with a decision that came down with no warning or consultation.   
2. We are continuing our lobbying efforts on behalf of our industry and most importantly on behalf of our customers, each of whom depend on this information to make decisions daily.
3. Process Suggestion: With respect to details of convictions on the Not Clear results that occur about 6% of the time, we recommend that you 

a. For candidates that we report as Not Clear - Review the candidate’s claims on their consent form – Did they admit to a conviction? If they did, you can consider using that information to make a decision. 

b. You can also use that information to determine if they were honest when filling out the consent form – about half of people with criminal records are not forthcoming about the existence of a criminal record.

4.  Regarding Vulnerable Sector Searches, the unfortunate reality is that only a police service is allowed to query for pardoned sexual offences when someone appears at the counter.  We can still process a Criminal Check for all non-pardoned offences and deliver that information quickly.  We are looking into options including Freedom of Information requests, which are governed under federal and provincial legislation.

5.  Representatives from our industry have been invited to participate in a Working Group in January on this topic.

Please stay tuned, as we update you regarding all of these matters.  We hope to have more information to you in the next few days about all of the above.