TRACE good business and reduce counterparty risk


TRACE good business and reduce counterparty risk

Serious players in shipping are becoming increasingly aware of sustainable business conduct, paying careful respect to the environment, people’s health and regulations. We at Torvald Klaveness always seek to uphold our company value INTEGRITY, and be in compliance with all laws and regulations. Carefully selecting our partners and expecting them to live up to our standards, ensures this. TRACE certification is an important tool used to identify solid business partners and map their business conduct, a tool with several advantages.

TRACE is a non-profit business association working to advance commercial transparency worldwide, by supporting the compliance efforts of multinational companies and their third party intermediaries. They provide members with anti-bribery compliance support, risk-based due diligence, anti-bribery training and advisory services. TRACE’s reputational screening process covers thousands of news sources, hundreds of international sanctions and enforcement lists, and a database of politically exposed persons.

As a response to the steady increase of counterparty due diligence requests and Klaveness’ own need to screen business partners, Torvald Klaveness’ Legal department initiated the TRACE certification process in Q4, 2015. The process included a 22 page questionnaire requiring detailed information about the group’s structure and history of key persons, online anti-bribery training and about 70 follow-up questions.

Klaveness took advantage of acquiring the certification as part of the TRACE/RIGHTSHIP alliance pilot project. For vessel owners who undergo the TRACE compliance rating process this means the TRACE compliance rating will be displayed on the RIGHTSHIP platform, which also applies if the vessel owner is a member of the Maritime Anti-Corruption Network (MACN).

As of now, Klaveness Ship Holding AS, T Klaveness Shipping AS and Klaveness Bulk AS have been TRACE certified as part of the TRACE/RIGHTSHIP alliance pilot project. A TRACE certificate and a due diligence report may be shared with business partners upon request. Responding to major customers’ due diligence requirements, Cabu Chartering AS and AS Klaveness Chartering are TRAC[1] certified.

Some blue chip companies have a TRACE or TRAC certification as a prerequisite for becoming a preferred supplier. For companies that have governance procedures and minimum requirements for onboarding business partners, such as Torvald Klaveness, establishing business relationships becomes very efficient. Consequently, the administration and costs of running Know-Your-Customer (KYC) processes with all counterparts are substantially reduced: having done it once with TRACE, you are complying with most players’ requirements.

When a Torvald Klaveness company enters into contracts with suppliers and customers, we require a minimum KYC assessment, along with a credit analysis, prior to contract execution. Counterparts that have been TRACE certified we consider to have fulfilled the KYC requirements, effectively saving us both the time and money running a due diligence ourselves. Acknowledging the transparency displayed by the counterpart, furthermore counts positively in our credit assessment. Having strong confidence that a business partner is not engaging in activities that e.g. is subject to sanctions, money laundering, corruption or illegal activities, we reduce the likelihood of being put in a liable position in the future. The consequences of executing business with wrong partners are devastating. It not only undermines our values, but also destroys our integrity in the marketplace and can potentially place us under criminal charges with corresponding direct economic loss, or even jail sentences for responsible employees (who might have acted in good faith, but failed to do proper investigation). The access to funds from bank loans and transaction in USD, which are vital to a shipping company, could also be impacted by being in breach of sanctions and regulation, underscoring the importance of a robust KYC assessment.

Going forward, further Klaveness entities will undergo the full TRACE certification, eventually ending with certification of all key entities within the company group. By doing this, Klaveness shows it commitment to commercial transparency, allowing our companies to serve as valued business partners to multinational companies. We encourage our business partners and other players in the shipping market to follow suit.

Author(s): Torodd Eeg-Olsen and Nicolai Lunde

[1] In the process of providing anti-bribery services, TRACE identified a broader need for a global system to verify baseline due diligence information for companies, partnerships, charities, and individuals committed to commercial transparency. TRAC, which stands for TRACE Registered Access Code, enables organizations and individuals to create an online compliance profile. TRAC holders are each assigned a unique code and have the ability to share their online profile with all of their global business partners.

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