Due Diligence in 2026: Why Companies Still Fail to Detect High-Risk Partners

Illegal Trade as a Global Threat

In today's globalized economy, the ability to develop, protect, and value innovation is at the heart of any successful business operation (OECD & EUIPO, 2016, p. 3). Intangible assets, such as knowledge and brands, are instrumental in rewarding investors' efforts (OECD & EUIPO, 2016, p. 3). However, piracy and the trade in counterfeit products represent a massive challenge, accounting for up to 2.5% of world trade and reaching a worrying 5% of imports in highly regulated regions such as the European Union (OECD & EUIPO, 2016, p. 5).

For organizations in Latin America, these figures are an inescapable alert. All innovative companies that rely on intellectual property to support their global strategy are at risk, regardless of whether they operate in developed or emerging economies (OECD & EUIPO, 2016, p. 13). As we approach 2025, the level of sophistication of illegal actors requires executives and compliance officers to urgently reassess their controls and truly know who they are doing business with.

Defining Due Diligence: The OECD Perspective

Within the analytical framework of the Organisation for Economic Co-operation and Development (OECD), due diligence is conceptualized as an ongoing, evidence-based effort to map and understand market vulnerabilities created and exploited by illegal trade (OECD & EUIPO, 2016, p. 5).

Robust corporate due diligence requires strengthening law enforcement practices and risk-based internal controls to protect supply chains (OECD & EUIPO, 2016, p. 83). It is not a simple regulatory checklist, but a comprehensive assessment that considers the relationship between the volumes of goods traded and the quality of governance or public sector integrity in the countries involved (OECD & EUIPO, 2021, p. 61). In practice, it involves actively identifying potential partners and transit points based on statistical filters and indicators of logistical risk propensity (OECD & EUIPO, 2021, p. 75).

Major Business Failures in Supply Chain Management

Despite tightening international regulations, companies continue to show three major strategic deficiencies that facilitate the infiltration of high-risk actors:

• Lack of Traceability: The concept of outsourcing activities is not new, but technological advances have led to an unprecedented fragmentation of production (OECD & EUIPO, 2016, p. 32). Counterfeiters take advantage of this fragmentation and ship products through extremely complex routes, using multiple intermediary points, which poses a formidable obstacle for companies trying to monitor their goods (OECD & EUIPO, 2017, p. 8). Furthermore, navigating the intricate "spaghetti bowl" of more than 420 regional trade agreements makes full traceability difficult (OECD & EUIPO, 2016, p. 32).

• Superficial Assessments: Organizations often ignore how their products are transported in the last mile. Statistics reveal that postal shipments are the most popular method for moving pirated products, accounting for 64% of global seizures (OECD & EUIPO, 2021, p. 24). Evaluating a supplier without auditing its small-scale logistics methods, or ignoring the misuse of Free Trade Zones (FTZs) (OECD & EUIPO, 2021, p. 61), creates critical blind spots.

• Dependence on Third Parties Without Verification: Distribution chains rely heavily on multiple intermediaries, but real verification of their operational standards is often non-existent. Criminals clearly exploit the limited capacity of compliance and customs teams, a systemic vulnerability they skillfully leveraged during the recent disruption of global logistics chains (OECD & EUIPO, 2021, p. 18).

  
  

Relationship with Illegal Trade: Fueling Criminal Networks

These corporate weaknesses are the main driver of growth for underground economies. Illegal trade is not a victimless crime; organized criminal groups play an increasingly prominent role and benefit enormously from profitable counterfeiting operations (OECD & EUIPO, 2016, p. 5).

Trade and transport facilitation have not only driven economic growth but have also created new opportunities for criminal networks to expand the scale of their operations and pollute legitimate trade routes (OECD & EUIPO, 2017, p. 3). When a company fails in its due diligence processes, it essentially provides logistical infrastructure and a legitimate facade for these networks.

Strategic Implications: The True Cost of Negligence

The cost of evading sound risk management has destructive effects on multiple fronts for any corporate organization:

• Legal Risks: Illegal operations undermine good governance, the rule of law, and citizens' trust in institutions, and can even threaten political stability (OECD & EUIPO, 2017, p. 3). Involved companies, even by omission, are exposed to serious litigation and regulatory penalties.

• Financial Losses: These practices have strong negative effects on the sales and profits of affected companies (OECD & EUIPO, 2016, p. 5). The legitimate competitive advantage of rights holders is destroyed, discouraging investment, employment, and long-term economic growth (OECD & EUIPO, 2016, p. 5).

• Reputational Damage: The lack of logistical controls allows the introduction of dangerous products into the market. In many cases, counterfeits have serious implications for health, user safety, and the environment (OECD & EUIPO, 2017, p. 3), destroying brand equity irreversibly.

To face the complex operational landscape in Latin America heading into 2025, regulatory compliance must evolve from a reactive model to a predictive, technical, and analytical one. This is where the role of Strategos BIP is indispensable. We understand that safeguarding a company's assets and integrity requires going far beyond paper-based controls.

References

OECD & EUIPO. (2016). Trade in counterfeit and pirated goods: Mapping the economic impact. OECD Publishing.

OECD & EUIPO. (2017). Mapping the real routes of trade in fake goods: Executive summary. OECD Publishing.

OECD & EUIPO. (2021). Global trade in fakes: A worrying threat. OECD Publishing.