Companies operating in Africa should actively prepare for investigations and stay ahead of their due diligence requirements, especially when it comes to handling data, according to a panel of lawyers and investigations experts.
Hosted on 5 October by London-headquartered consultancy Control Risks and held as part of the United Kingdom government’s ‘Legal Services Are GREAT’ campaign, which promotes English and Welsh law and legal services abroad, ‘The potential and limits in leveraging technology to support investigations in Africa’ was an online event featuring speakers from international law firms DLA Piper, Herbert Smith Freehills and African firm Bowmans.
TECHNOLOGY OPENING DOORS
Noting the way the landscape has changed in Africa, Maria Knapp, a solicitor and partner at Control Risks in London said that over the past 10-15 years, there had been “a big change in that time, notably in the legal expertise driving quality and innovation in the investigations space from within the continent”. It is not just international firms doing this either, “African firms are really leading on complex and often multi-jurisdictional investigations”.
The “huge changes in the technology tools available” have changed what is achievable in investigations during even just the past two years, which was just as well as the pandemic had led to a “significant increase in companies dealing with fraudulent activities and detection of fraudulent activities” but also “increase in the use of technology to facilitate investigations” such as e-discovery and document review software, particularly when travel was restricted.
Whereas 15 years ago, gathering data was cumbersome and involved physically collecting hard drives, with cloud computing access is now much easier, observed Cameron Dunstan-Smith, a corporate crime and investigations director at Herbert Smith Freehills in Johannesburg.
The data is often not hosted in Africa though, which creates a price barrier for African clients when conducting e-discovery, as only multinationals can afford to take on that cost.
There are a range of challenges, from the physical to the systematic, when working through investigations in Africa. On the practical front, there are logistical difficulties accessing documents in remote settings that are often in physical boxes, as pointed out by Satinder Soni, an e-discovery London director at Control Risks.
Generalisations are risky, as in Africa there is a dichotomy between a continent where there are a lot of paper records, and yet “a continent where the proliferation of mobile usage and banking through mobiles is just there” said Adam Vause, a partner with DLA Piper in Dubai, “so data is absolutely key”, it is just a question of how to get it, as the ability to collect remotely is not always perfect.
“When you can use the technology, it gives you a huge advantage. When you can’t, you have got to work with what you have got,” he added.
There is also a difference depending on who is gathering the data. Richard Harney, senior partner with Bowmans in Kenya, pointed out that central banks, regulators and other enforcement agencies have a capacity that “is quite impaired by comparison to the ability of modern-day multinational companies” which have the technology and expertise.
The challenge for agencies is not technology, so much as “having the manpower to analyse the data and then producing it in a condensed way so it can be used for compliance and enforcement”.
There are also more international concerns, such as when corporate crime is being investigated in multiple countries. Dunstan-Smith noted that Western regulators, for example in the United States, can act and resolve a matter relatively quickly, but if the same matter is also under investigation in an African country where resolution is a long way from being resolved, auditors will not be willing to sign off and close the matter, even though there is little prospect of any action being taken. This can drag the situation on for much longer than necessary or helpful for the business.
For example, he continued, when a deferred prosecution agreement (DPA) is signed in the US or UK, a company’s share price goes up because the matter is closed, but the slowness of the African regulators prevents this progress from being made.
Knapp agreed that the market likes certainty, which is hard when that is not possible.
Smaller businesses need not be weighed down by their anti-corruption and bribery requirements, said Vause, a former prosecutor with the Serious Fraud Office. The requirements of the Bribery Act are relatively straightforward, and with “regular proactive risk assessment”, due diligence and advance planning, they can be on top of their duties, he said.
“Many organisations just don’t do that. They prefer just to move ahead, run the gauntlet and just react,” he added.
Harney agreed that even small companies can put in place whistleblowing policies, which are “a good way to stop the rot” because employees do not necessarily want to go to the authorities. “A properly run whistleblower system makes all the difference.” Although Harney warned against incentivising them to report, whistleblowers will need safeguards and anonymity if they are to be encouraged, due to the risk of reprisals, warned Dunstan-Smith, while accepting that it is unwise to generalise too widely about the response to whistleblowers across a large continent.
BUILDING ON THE FINTECH REVOLUTION
The speed with which Africa has adopted fintech, ahead of many other parts of the world, suggests that life will get easier for those conducting investigations across the continent. Dunstan-Smith observed that the use of mobile money and cloud computing will make it easier to gather documentation. Soni has already seen an “uptick in looking at different data sources”.
A new variety of tools are coming to the market, enabling organisations to get to more important documents, dates and so on, commented Vause.
“Don’t be scared of it,” was Dunston-Smith’s advice to companies. Having proper processes will be “far cheaper in the long run” in terms of cost-efficiency and the ability to deal with the situation, advice echoed by Knapp, who recommended that businesses “adopt the tech”.
Again, there are benefits to properly engaging with the risks and requirements of using technology. Harney’s advice was to “understand the regulatory legal environment in which you are going to operate”, such as the existence of data protection laws about what information can be extracted.
Any data used in an investigation “has to be flawless”, said Soni, so enlisting a forensic accountant early, getting the right legal and technical advice, and using regional experts that understand local nuances are all important, as “the data output is only as good as the people who are on the job”.
Simplicity is also important, not everything is about technology as a lot of fraud still takes place offline, so access to a good private detective is advisable, Harney added.
That self-awareness is important, and “organisations should understand what they have got”, a process that is simple but valuable, said Vause.
The seminar ended with a warning from Harney that “people look at Africa and think it is just one region”, making the mistake of expecting homogenous rules. There are many varying challenges across jurisdictions and particularly when cross-border matters are involved, and although there could be moves for harmonisation on data regulation down the line, the future is unclear.
In June, a seminar hosted by law firm Goldsmiths heard that fintechs in Nigeria need to consider a patchwork of different regulations when setting up and running their businesses. Nigeria’s data protection regulation was overhauled in 2019 as was that in Uganda, while Benin has been one of the continent’s early adopters when it comes to regulation and Cape Verde has recently introduced a new data protection law.
This article was originally published by ICLG.