Security Due Diligence for Business Partnerships in High-Risk Markets

Entering a joint venture or commercial partnership in a high-risk market carries risks that standard financial due diligence is not designed to identify. The beneficial owner of the company you are contracting with may be a politically exposed person, a sanctions target, or an individual with documented criminal associations. The facility your executives will work from may be in an operating environment controlled by armed groups. The partner’s dispute resolution history may include intimidation. These are not theoretical scenarios – they are documented patterns in markets from West Africa and Latin America to Central Asia and Southeast Asia. This article sets out what security due diligence covers, how it is conducted, and when it must be part of the partnership process.

What Security Due Diligence Covers

Security due diligence examines the people and relationships behind a commercial entity, the operating environment in which a partnership will function, and the physical security implications for your personnel. It is a different discipline to financial due diligence, which addresses balance sheets, liabilities, and regulatory compliance. The two are not interchangeable and neither substitutes for the other.

The core components of security due diligence are: beneficial ownership investigation to establish who ultimately controls the entity; screening against sanctions lists, PEP databases, and adverse media sources; assessment of the operating environment including organised crime presence, state security apparatus behaviour, and dispute resolution norms; physical security implications for deployed personnel; and verification of representations made about the partner’s status and relationships.

Control Risks and other specialist due diligence firms typically structure this as a phased process. Phase one uses open-source and database tools to establish a baseline. Phase two uses in-country human intelligence where phase one returns material concerns or gaps. Phase three – where necessary – involves structured interviews or site visits (Control Risks Third-Party Due Diligence Framework, 2025).

Beneficial Ownership and the PEP Problem

The legal entity you are contracting with is rarely the whole picture. In high-corruption markets, the registered company may have entirely clean documentation while the individual who controls it – one, two, or three ownership layers up – is a politically exposed person, a sanctions target, or a person with documented criminal associations.

The Financial Action Task Force (FATF) Guidance on Beneficial Ownership (2023) requires that enhanced due diligence looks through to the ultimate beneficial owner of any entity: the natural person or persons who ultimately own or control it. Many jurisdictions now have beneficial ownership registers – the UK’s Persons of Significant Control (PSC) register, for instance – but these are only as reliable as the information filed. In jurisdictions with weaker enforcement of disclosure requirements, nominee ownership structures are widely used precisely to prevent disclosure.

A politically exposed person is an individual who holds or has held a prominent public function: a head of state, government minister, senior military officer, senior judicial official, or equivalent. PEPs carry elevated bribery and corruption risk because of their access to state resources and decision-making. Entering a partnership with a PEP in a high-corruption jurisdiction without enhanced due diligence is a significant bribery and reputational risk. The FATF framework and UK/US anti-money-laundering legislation both require enhanced diligence for PEP-linked relationships.

Transparency International’s Corruption Perceptions Index 2024 provides country-level baseline risk rankings. A country in the bottom quartile of the CPI is not automatically off-limits, but it should trigger a higher standard of due diligence as a default.

UK Bribery Act and FCPA: Personal Liability

The UK Bribery Act 2010 creates several offences with extraterritorial scope. The most significant for corporate partnerships is the Section 7 corporate offence of failing to prevent bribery. This attaches to any UK-incorporated organisation or organisation with a UK business presence. It covers bribery committed by associated persons – including joint venture partners, agents, and intermediaries – in any jurisdiction.

The only complete defence to the Section 7 offence is demonstrating that the organisation had adequate procedures in place to prevent bribery. The UK Ministry of Justice guidance on adequate procedures makes documented due diligence central to that defence. An organisation that enters a joint venture in Nigeria, Kazakhstan, or Indonesia without conducting and documenting thorough partner due diligence cannot rely on the adequate procedures defence if the partner subsequently pays a bribe. Individual employees can face personal criminal liability as well as the organisation.

The US Foreign Corrupt Practices Act (FCPA) has equivalent extraterritorial reach. The DOJ and SEC FCPA Resource Guide (second edition, 2020) establishes that successor liability applies in mergers and acquisitions and that organisations are liable for the conduct of third-party agents and partners. FCPA enforcement actions have frequently followed from due diligence failures in partnership structures – the 2024 enforcement calendar included several cases centred on undisclosed partner relationships with government officials.

For M&A contexts where partner due diligence sits alongside commercial and financial diligence, the security in mergers and acquisitions guide covers the integration of security DD into the transaction timeline.

Sanctions Screening: OFAC, OFSI, and EU Consolidated Lists

Sanctions screening should cover the entity itself, its beneficial owners, and its key principals against the OFAC Specially Designated Nationals (SDN) List, OFSI’s UK Financial Sanctions List, and the EU Consolidated Sanctions List. Doing business with a designated entity or individual – even without knowing of the designation – can constitute a sanctions violation. The knowledge standard varies between OFAC and OFSI, but strict liability provisions in some sanction regimes mean that ignorance is not a reliable defence.

Automated screening tools such as LSEG World-Check and LexisNexis Diligence integrate multiple sanctions lists and update them in near-real time. They are appropriate for initial screening but have limitations in high-risk jurisdictions where designation information may lag events on the ground or where the relevant individual operates through multiple aliases or corporate structures.

OFAC enforcement guidance (2024) emphasises that voluntary self-disclosure and robust compliance programmes – including documented partner screening – are considered as mitigating factors in enforcement actions. The cost of implementing systematic screening is categorically lower than the civil penalty exposure for a sanctions violation.

Criminal Associations and Physical Risk

Not all security risk is captured in formal sanctions or court records. In many high-risk markets, the relevant risk is not that a partner is formally designated but that they operate within a network that includes criminal actors, armed groups, or political protection arrangements. This type of risk does not appear in World-Check or the SDN list.

In-country human intelligence is the primary tool for identifying these relationships. A specialist due diligence firm with genuine in-country capability – not just a local correspondent who files reports from secondary sources – can map the actual relationships around a potential partner. This matters for physical security as well as compliance: if your personnel deploy to a facility in Nigeria’s Niger Delta or a joint venture site in the Philippines, the operating environment around that facility is shaped by relationships your partner has with local actors, armed or otherwise.

The hiring security personnel overseas guide covers the related question of how to vet local security providers in these environments. The due diligence principles are similar: database screening is a floor, and in-country intelligence provides the ceiling.

Integrating Security DD into Partnership and M&A Timelines

Security due diligence is most effective when built into the partnership process from the outset rather than appended as a compliance formality late in the timeline. In practice, this means: initiating screening at heads of terms or letter of intent stage, before significant commercial commitment has been made; establishing a go/no-go gate based on due diligence findings before contract exchange; and building ongoing monitoring obligations into the partnership agreement itself, so that material changes in the partner’s status or relationships trigger review.

For M&A transactions, FCPA and Bribery Act successor liability means that the acquiring organisation inherits the target’s compliance history. Due diligence must address the target’s historical partner relationships and any legacy issues, not just its current state. The time to identify a legacy FCPA issue is before the transaction completes, when remediation options are still available.

The political risk guide covers the wider framework for monitoring operating environment risk in high-risk markets, including the intelligence sources most relevant to ongoing partner monitoring. For the governance and legal liability dimensions of due diligence relevant to board members and NEDs who sit on the boards of partnering entities, see our security for board directors and NEDs guide. For the specific application of due diligence principles to private equity deal teams conducting due diligence travel in high-risk markets and reviewing acquired portfolio company security programmes, see our security for private equity deal teams guide. For venture capital investment firms conducting due diligence travel in P1 markets and managing conference elicitation risk at GITEX, LEAP, and FII – where fund intelligence, LP identity exposure, and investment thesis data carry specific state intelligence collection value – see our security for venture capital and investment firms guide. For reinsurance market participants conducting counterparty due diligence – where catastrophe model data, treaty terms, and Lloyd’s market syndicate capacity represent commercially sensitive intelligence targets requiring specific partner security assessment protocols – see our security for reinsurance and Lloyd’s of London market guide. For compliance teams conducting anti-corruption due diligence fieldwork in high-risk markets – Bribery Act 2010 adequate procedures, FCPA DOJ guidance 2023, TI CPI 2024 market risk calibration, Mintz Group Beijing detention implications, and investigator personal security in P1 city environments – see our anti-corruption compliance fieldwork security guide.

Sources

Transparency International Corruption Perceptions Index 2024. FATF Guidance on Beneficial Ownership, Financial Action Task Force, 2023. FCPA Resource Guide, second edition, US Department of Justice and US Securities and Exchange Commission, 2020. UK Bribery Act 2010 and MoJ Guidance on Adequate Procedures, 2011. OFAC Enforcement Guidelines and SDN List, US Treasury, 2024. OFSI UK Financial Sanctions Implementation Guidance, HM Treasury, 2024. Control Risks Third-Party Due Diligence Framework, 2025.

For the supply chain security and SCRM framework that extends partner due diligence across Tier 2-3 suppliers – Modern Slavery Act transparency obligations, Bribery Act adequate procedures for supply chain partners, ISO 28000:2022, and software supply chain intrusion risk – see our supply chain third-party risk and SCRM guide.