Central Asia: Integrity Due Diligence. Third Parties Risks. Your Trusted Advisors for Central Asia International Investors Solutions: Managing Your Risks in Central Asia Doing Business in Central Asia: Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan, Turkmenistan.

Corruption is pervasive in several countries of Central Asia, where a majority of respondents say they are either asked or are expected to pay bribes to receive public services...

If your company’s business is carried out in one of the post-Soviet Central Asian countries like Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan, or Turkmenistan, then

Making your corporate ethics policies understood and routinely referred to by employees at your local offices in Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan, and Turkmenistan is a huge challenge. Solving this challenge means getting rid of foreign corruption exposure

Sarsenov Corporate Governance Advisory
Compliance in Kazakhstan, Kyrgyzstan, Uzbekistan
Corporate Governance & Compliance Services
Advising on compliance risks in Kazakhstan, Uzbekistan, Kyrgyzstan





Complete compliance risk picture. In case you are interested in a complete compliance risk picture in one or several countries of your company's operation in Central Asia, we can prepare comprehensive risk report for you regarding your local compliance risks. The report will include all compliance risks and will be tailored towards your company's specific industry and type of business in the region.

Limited compliance report. We also prepare limited reports which describe only specific risk exposure to your comany's operations in the region, for example, bribery in obtaining construction permissions, importing licenses, other licences, permissions, or your local exposure to money laundering risk, or whether harrasment, property stealing, frauds and other wrongdoings are highly probable, or how much politically exposed persons (PEPs) involvement into your local businesses is possible, or if your local partner might be involved into corruption in the way of distribution of goods, procurement, or government contracts, or other risks.

If you are newly embarking in Central Asian market. However, if your company is newly embarking in Central Asian markets and you are looking for initial understanding and getting familiar with, and delineating your local compliance risk universe, then we can develop a local risks inventory for your company’s current or planning specific operations in Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan, and Turkmenistan.

Compliance risk map. We help to develop local compliance risk map for international businesses with operations in Kazakhstan and other Central Asian countries. We also help in revision of existing risk map concerning your company's operations in one or several countries of Central Asia, including classification or re-classification and prioritizing of all y local compliance risks in Kazakhstan and Central Asia.

Comprehensive recommendations. In addition to all that, we can also develop comprehensive recommendations on improving your local compliance and ethics components in your Central Asian offices.

See also:

Advising on Anti-Money Laundering in Central Asia

Assessment of compliance controls in Kazakhstan and Central Asia locations

Third party due diligence in Kazakhstan, Kyrgyzstan, Uzbekistan

Adapting Compliance and Ethics Policies for Kazakhstan and Central Asian Offices

Customized compliance training for Kazakhstan and Central Asia

Investigations in Kazakhstan, Kyrgyzstan, Uzbekistan

Call or email us if we did not answer your questions here. Let us help you to prevent your company from compliance failuer in Central Asia.

Phone: +1 (718) 289 4134

Email: cga@sarsenov-advisory.com


Zooming in your compliance risk map: What should you know about compliance risks in Central Asia?


Corruption. EBRD ranks corruption among the top three obstacles to the business of representative firms in most of the Central Asian countries. According to EBRD’s 2010 Anti-Corruption Report, corruption is pervasive in several countries of Central Asia. The majority of respondents say they are either asked or are expected to pay bribes to receive public services. With such a war zone on your risk map, you are not expected to be shortsighted about your risks in countries like Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan, and Turkmenistan. Some risks may easily go under your identification radars. For one of the riskiest zones—Central Asia—you do not want to entrust all your compliance risk evaluation—or say your tranquility—to your local compliance/risk officer alone. You need to secure a second opinion from an independent expert that is very familiar with both the highest U.S. and European compliance standards and a real situation on the ground in countries like Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan, and Turkmenistan.

We can help you spot your compliance risks in Central Asia.

If your company’s business is carried out in one of the post-Soviet Central Asian countries like Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan, or Turkmenistan, then corruption and commercial bribes, frauds, third parties' risks, politically exposed persons and money laundering are the most insidious enemies for your program. They develop and twist like web viruses; they never stop and are never the same. The worst thing is that corruption and some other crimes become a normal way of life here. Corruption is getting worse year after year despite many high profile anti-corruption, anti-money laundering, and other initiatives that have been taken regularly.

Central Asia is one of the most dangerous and risky zone from a compliance view. It is hard to overvalue double checking your local compliance risks in Central Asia. You better double check you got all killing risks in Cntral Asia on your compliance risk map if you seriously want to prevent catastrophic events.


Third party risks. Potential reputational risks and integrity concerns should be approached very seriously in Central Asia. Such risks here can usually be associated with dealing with local clients, vendors, suppliers, local consultants, joint venture partners, etc.

According to KPMG’s 2013 analysis*, Central Asia is shown to be among the three most dangerous geographical regions, with the highest—70%—red reports in financial sector companies’ integrity due diligence. Same report says that Central Asia stands out from other regions as showing the highest third-party risk—53%—of all third-party reports by KPMG in Central Asia.

The major integrity problem here in Central Asia region is generally related to a hidden opaque ownership structures used in the business. Dealing with local companies you sometimes may be even not aware who is the ultimate beneficial owner of this particular business you are dealing with. So the odds are high to ending up doing business with corruptive government officials, inadvertently, of course. But who would care about it if your company violated FCPA or UK Bribery Act? Even worse, your company may be easily get to be involved into money laundering schemes. Again, inadvertently. Believe us or not, you might even not have a clue of you doing that. But both Ministry of Justice and SEC, or SFO (for UK) barely going to be kind and understanding about that when it happens.

The hidden presence of politically exposed persons (PEPs) among local businesses is a vastly popular thing. Often, only the word of mouth and artful networking with local experts can help you to save a day in this kind of situations. It is also worth noting that lots of proposed projects do not proceed here due to integrity concerns in the region.

Sometimes even local offices of big consulting firms might be doing not very ethical business while serving their international clients here. In one recent case, a big consulting firm, even having its own local office here, was looking for local partner for doing "all that dirty job” related to government permissions and registrations. That job was actually about obtaining all licenses and permissions for international client in its big construction project in Kazakhstan.

Bribery blossoms here. Under the guise of normal business firms, in reality, you may reveal a firm embedded into various levels of corruption chain.

Money laundering, bribes and Politically Exposed Persons (PEPs). Politically Exposed Persons (PEP). Specifically, offshore structures used extensively to hide both ownership and profits abroad. This schemes most often used by Politically Exposed Persons as well as by other lower level officials who deal with government procurements, government licenses, permissions or those who have some controlling and investigative authority over businesses.

Today almost every Politically Exposed Persons along with tens of his relatives in Central Asia are sacking resources from government and businesses by using various combinations of business structures and agents which facilitate both corruption and money laundering.

The most extensive way of embezzlement in Central Asia is that of over government procurement, just like it was happening in early 80th in the USA. Regulatory and enforcement authorities, permissions and licenses are used by government official as instruments for soliciting bribes. About $5 billion of such illegal money annually seeking their way back into legal business turnover in Central Asia. Here comes money laundering. Again, look at the numbers: for year 2012 $1.78 trillion dollars cashed out through various money-laundering mechanisms in only one of Central Asian countries, Kazakhstan. And the hidden presence of Politically Exposed Persons among local businesses is a vastly popular thing. Often, only the word of mouth and artful networking with local experts can help you to find right information about real owners of your business partners, vendors, suppliers, and especially, your buyers.

Whatever the reason for using offshore structures in Kazakhstan and Central Asia this means billions of dollars laundering and putting in business again. Many AML, Anti-Corruption and other acts and initiatives are being held so far. But none of those acts and initiative are effective.

Cultural Gaps. Do employees and third parties at your company’s most risky locations realize the possible consequences of very small neglects in the strict application of your corporate policies, codes, manuals, specifications, and instructions? Can you be sure that local personnel, sales and marketing managers, and vendors understood what you wanted from them during your last monitoring? Do they ask you questions? Do they disagree with you? How can you check whether your controls are adequate, stable, and strong here?

The problem is that employees and managers of Central Asian offices might not let you know they disagree with you even on important issues, be it your company’s new policy, ethics rules, new methods, etc. They may be reluctant to raise the problem up when they supposed to. Finally, they may simply omit very mportant signals you as a compliance officer must be aware about. It is inherent to most Central Asian cultures to be polite, smile, and not behave assertively towards foreign people, expat managers, and simply higher level officers. Your compliance manager may not be raising the issue to you when he or she supposed to do that. Your compliance officer lives in a different ethics dimension, with a different reality and a different vision of integrity and righteousness. When your local manager seems to be agreeing with you, it does not necessarily mean he understands you or shares your vision. In Central Asia, it is considered impolite when he or she disagrees with you if they are your subordinate. So you can be totally unaware of the real picture and real circumstances about your compliance controls on the ground. You can only know what you are served by your local officer or managers. You get you picture through the lense off your local personnel's perception. But this picture in 70 percent of cases is twisted. The stakes are high in Central Asia. You may find it out when it is too late.

If you want to stay updated on compliance risks in Central Asia and about possible ways of mitigating your risks, you may subscribe to our alert service — Compliance Updates from Central Asia — which will regularly provide you valuable compliance developments from Central Asia. This service is free.

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Phone: +1 (718) 289 4134

Email: cga@sarsenov-advisory.com

* KPMG. Astrus Insights. Analysis Of Third-Party Integrity Risks. 2013. Edition