Risk briefings, musings and discussion

Opening up shell companies

The Economist reports on efforts to make ‘offshore’ less synonymous with corruption and tax evasion.

  “Tracing illicit funds to a shell’s bank account is of little use if you cannot identify the individuals who control it. This worries business people as well as policymakers: a recent survey of corporate leaders in 62 countries by EY, an accounting firm, found strong support for more openness in ownership; legitimate firms want to know whom they are trading with.”

The article concludes that in spite of the attention afforded offshore havens via the blanket coverage of the Panama Papers and others, there is little hope for a full, open register of such entities any time soon, and we’re inclined to agree.

Turkmenistan: Corruption, Risk and Reward

While recent improvements have been made, extreme caution and sound risk management are still advised.

In January 2016, Human Rights Watch, Freedom House and Transparency International released their 2015 reports on human rights, political freedom and corruption, respectively. All three reports bring into focus the pervading situation across Central Asia: the ubiquity of severe human rights violations, a blatant disregard for democratic values, and an ineffective fight against corruption at government and corporate level.

Freedom House named Turkmenistan and Uzbekistan among “the worst of the worst” with regard to political rights and civil liberties, while Transparency International placed Turkmenistan 154th out of 167 on its annual Corruption Perception Index. Human Rights Watch stated Turkmenistan’s “atrocious” record had actually worsened in 2015.

The International Monetary Fund visited Turkmenistan in November last year and immediately lowered its forecast for 2016 GDP growth by 2.9% to 6%. The general message on the state of Turkmenistan’s government and economy is unequivocally negative.

After the collapse of the Soviet Union there was a strong belief that Turkmenistan would quickly undergo a transition to democracy and free market economics but owing to its historical dependency on Russia and other authoritarian regimes with no tradition of democracy, political pluralism or the rule of law, the transition was de facto doomed. As a result, the investment climate for international companies has remained limited and extremely risky.

But we are observing small green shoots of change. In July 2015 the Turkmen President Gurbanguly Berdymukhammedov dismissed several high ranking government officials for various crimes. This March, the President publicly raised serious concerns over the level of graft in the domestic oil and gas industry, a clear response to the exit of Germany’s DEA Deutsche Erdoel AG, citing corruption and bureaucratic delays. In the same month, the World Bank held a practical training session on fiscal policy and macroeconomic management.

We might therefore conclude that Turkmenistan’s leadership has understood that real and lasting change must be carried out: the rule of law, the free economy and anti-corruption measures must be significantly strengthened before the country may make full use of its natural resources, develop its attendant industries, and deliver substantial economic growth.

Currently the main foreign investors in Turkmenistan are its neighbours, politically and geographically – China, Russia, Kazakhstan and Uzbekistan. A wider audience should understand Turkmenistan’s fantastic potential, but while the potential rewards are great, Central Asia’s authoritarian regimes are not an easy sell in the boardrooms of the west.

CNS Risk has a deep understanding of how business is done in the country and specifically how its oil and gas industry functions; while we acknowledge that this is a difficult country for western corporates to operate in, we have the experience and capability on the ground to help steer businesses through this often hostile environment.

For a demonstration of how we can help, please contact our Former Soviet Union (FSU) & Central Asia team directly. The team is led by Gareth Babbs, a skilled navigator of the bureaucracies of the FSU with 20 years of direct experience as MD/CEO of multinational businesses across the regions.




Freedom House:


Kazakh Privatization: Ensuring Safe Investment

On December 25, 2015, the Kazakh National Economy Ministry published a list of large state-owned organizations to be privatized during 2016 – 2020. These include Temir Zholy, the Kazakh railway company; KAzMunaiGaz, an oil and gas company; Samruk-Energy, a company engaged in the production, transmission, distribution, and sale of electricity; Kazachstan Gharysh Sapary, focusing on development of space activity in Kazakhstan; Kazgeologiya, the national geological exploration company; the Kazakh sovereign wealth fund Samruk-Kazyna; and the Astana international airport.[1] According to the Minister, large-scale privatization is a priority of the Kazakh government in 2016.

Given the global relevance of the Kazakh market, many international corporations are expected to participate in this privatization: last month the country became the 162nd member of the WTO, recent trade and investment deals were signed with the UK,[2] US and China[3], and Kazakhstan has been for several years developing a national FDI strategy.

Privatization, as one of the market reforms, often aims at improving economic efficiency by reducing the role of the state. Yet, the process of privatization, which is the cornerstone for prospective efficiency, has to be carried out with great care.

Corruption, which in the words of Joseph Stiglitz, represents “perhaps the most serious concern with privatization, as it has so often been practiced ….”[4] might greatly impair those involved – both the state and the competing investors.

Corruption continues to represent not only a moral disgust, but also a substantial economic burden on corporations. Furthermore, often neglected are the tremendous legal risks for individuals and their respective corporations.

It is of the utmost importance that all companies that take part in this privatization invest considerable time and resources in corruption prevention measures. To that end, deep-dive legal and risk due diligence must be undertaken, and strategic business intelligence must be collected and studied before making any commitment to the undoubted opportunities presented by Kazakh privatization.

CNS Risk has deep and varied experience of advising international corporates in Kazakhstan. Contact us directly to learn how we can help your company.


[1] A complete list of the state-owned companies that will be offered for privatization can be found at:

[2] See e.g.

[3] See e.g.

[4] See Stiglitz, J., Globalization and Its Discontents, 58 (2002, Allen Lane the Penguin Press, UK).

The Economist looks at whistleblowing

A very good piece in this week’s Economist, highlighting some of the benefits and pitfalls of whistleblowing, and the often irrational reaction of corporates to such behaviour.

“Ideally, firms would put in place a formal system for hearing and noting complaints—for their own sakes, as well as those of whistleblowers. When people fail to report wrongdoing, the main reason is often not the fear of retaliation but the suspicion that nothing will be done about it. Companies often see whistleblowers as motivated by revenge or greed. But studies consistently show that most are driven to right a wrong. That is why more than 90% of them sound the alarm internally first, rather than running straight to the authorities or newspapers. Given the choice, they would rather warn than accuse.”

Read the whole piece here – The Age of the Whistleblower

Romania forging further ahead in anti-corruption drive

Earlier this year we highlighted the success of Romania’s DNA anti-corruption agency, and applauded its fearlessness in going after high level politicians accused of graft; earlier this week street protests forced the country’s PM  to resign, but the catalyst was a DNA investigation begun months ago. As a piece in this week’s Guardian newspaper highlights:

“Nowadays there are 120 prosecutors working on more than 6,000 cases. The entrance to the DNA’s central Bucharest offices is permanently staked out by television news crews waiting to see who will turn up next for questioning.

Last year the agency successfully prosecuted 24 mayors, five MPs, two ex-ministers and a former prime minister, not to mention more than 1,000 other individuals, including judges and prosecutors, with a conviction rate above 90%.”



CNS RISK/ CIBG/ HBLF/ DLA PIPER – 2nd Integrity Workshop, Oct 13 2015

How prepared are you to react to today’s growing risks?

Oct 13 2015: CIBG, CNS RISK, DLA PIPER and the Hungarian Business Leaders Forum present a second interactive senior executive workshop with prominent CEE business leaders. The workshop will again explore challenges to business integrity and how they can be mitigated.

  • Interaction with peers & experts on managing whistleblowers or allegations of misconduct.
  • Learn how corporate intelligence is employed as a preventative measure and how it should be a third pillar of any due diligence exercise.
  • Consider how cultural differences across companies can render a compliance system useless.

The event is free of charge, but places are strictly limited.

For more details see here: Budapest Integrity Workshop, October 13

Contact CNS Risk for an invite:   Request an Invite


The long arm of the SEC – Ford, Germany and Russia

A few weeks ago the SEC joined a long running German investigation into alleged bribery and corruption of Russian customs officials by Ford Germany and DB employees.  Sources suggest that if the allegations are proven to be true, the accumulated penalties could run into several hundred million euros.

The case raises two important issues.

1. Catching up to UK and US prosecutors, the German authorities are now taking firmer interest in the conduct of German registered companies abroad.

2. If a parent company has any exposure whatsoever to FCPA regulations, the SEC’s reach is long and punitive.

Reuters has the background to the story here: SEC joins German Bribery Investigation

CIBG, CNS RISK & DLA PIPER – Integrity Academy

How prepared are you to react to today’s growing risks?

July 14 2015: CIBG, CNS RISK & DLA PIPER present an interactive senior executive workshop with prominent CEE business leaders. The workshop will explore challenges to business integrity and how they can be mitigated.

  • Interaction with peers & experts on managing whistleblowers or allegations of misconduct.
  • Learn how corporate intelligence is employed as a preventative measure and how it should be a third pillar of any due diligence exercise.
  • Consider how cultural differences across companies can render a compliance system useless.

The event is free of charge, but places are strictly limited.

Contact CNS Risk for further details:   Tell me more

CNS Risk in Bucharest – Integrity training

CNS Risk is proud to be part of the CEU Business School’s Integrity Training workshops. Held in Bucharest on Jun 29 and 30, this event is the latest in a series of management training sessions held by the CEU’s Centre for Integrity in Business & Government. CNS Risk’s managing partner, Nick Sarvari, is a key speaker and panel member.

For more info on the event:Managing Integrity – Bucharest Jun 29

For more info on the CIBG’s work:Centre for Integrity in Business & Government

Slovakia transparency reform: an unlikely champion

Until very recently Slovakia was the poster child for Central European corruption, with cronyism and clientelism the main order of the day. The 2011 Gorila scandal in particular lifted the veil on the deep and multiple connections linking the country’s political and business elites. Fast forward, and Slovakia is rapidly becoming the region’s transparency champion, driven by a radical reform that makes all public procurement documentation from all levels of government available to the public via the internet.

See the Open Society Institute/Transparency International’s take on the changes: Slovakia Corruption Reform