Due diligence on a copper counterparty: what to check, and when to pay for it

Before you sign a sales contract or move money, you should know who you are dealing with. Here is the list we work through. You can do much of it yourself.

The checklist

1. Registry. Is the company registered, active and in good standing? Check the registration number, address and date of incorporation in the official registry.
2. Directors and owners. Who runs it and who ultimately owns it? Does the person you are dealing with appear, or hold a written authority?
3. Sanctions and politically exposed persons. Screen the company, its directors and its owners. See sanctions screening.
4. Adverse media. Search the names with words such as fraud, scam, court and arrest, in English and in local languages.
5. Licences. For producers and exporters, check mining and export authorisations against the mining cadastre and the issuing ministry.
6. Documents. Do the names, dates and numbers agree across the offer, licences, warehouse receipts and certificates? Run key documents through a document check.
7. References. Speak to a warehouse, an inspector, a bank or a past customer who has dealt with them, using contacts you find yourself.
8. Site. For large or repeat business, an inspector or your own person on site is worth the cost.

Red flags that should stop you

• The company was registered very recently but claims a long trading history.
• Directors appear on many unrelated companies, or the registered address is a mass registration agent.
• Names on the documents don't match the company you will pay.
• The seller asks you to pay a different company, often in another country.

When to commission a report

Doing this yourself takes time and some of it requires access to registries in several countries and languages. It is worth paying for a report when:

• the first payment is large compared with the cost of the report
• the counterparty is in a country whose registries you can't easily search
• you are being asked to pay before you control the goods
• a financier or your bank asks for one

Copper Supply's due-diligence reports cover the registry, directors and owners, sanctions, adverse media and documents, with a written conclusion. The enhanced report adds licence and cadastre checks, document forensics and reference calls.