Kazakhstan, a country located only partially in Europe, and that in a small part. 88% of it is situated in Asia. Poland is strongly developing economic cooperation with Kazakhstan. Polish entrepreneurs, while establishing contacts with local business partners, ask themselves the question: How to check a company originating from such a distant, partly located behind the Ural Mountains, mostly Asian country?
Exercising due diligence when verifying a business partner:
In today’s world, starting a company is very easy. In many countries, you can do it without leaving your home, via the Internet. Therefore, you can never be certain who is really behind the created name and entry in the register until you check it. Verification involves commonly used actions in economic intelligence. It primarily consists of checking the reliability and currency of the counterparty’s documentation, including the National Court Register (KRS), Tax Identification Number (NIP), National Business Registry Number (REGON), as well as permits and certificates necessary for conducting specific types of activities.
Verification can be carried out by obtaining information from relevant individuals and institutions, such as the registry courts, Social Insurance Institution (ZUS), tax offices, or national and international chambers of commerce. It is worth delving into the knowledge about the history of the company and its owners, including opinions about the company, by searching the Internet or asking other entrepreneurs, contractors of that entity, as well as the interested party directly. It must be remembered that failure to exercise due diligence in selecting a business partner carries legal consequences, e.g., accusations of conscious participation in irregularities, resulting in further tax and legal sanctions.
National and EU sanctions:
For over a year, Polish companies have been even more cautious in their cooperation with foreign partners, including those from Kazakhstan, due to Russia’s military aggression in Ukraine. By the end of 2022, the European Union had imposed nine packages of sanctions on Russia. Poland also imposes its additional sanctions. They apply to key individuals in Russia, as well as companies from this country and Belarus. Trading goods and services with Russian and Belarusian companies is prohibited. Polish entrepreneurs who violate this prohibition may face financial penalties of up to PLN 20 million and even up to 15 years of imprisonment. However, Russian and Belarusian entrepreneurs have learned how to circumvent international bans. They use, among others, complex holding structures established in other countries, where the actual ownership structure is difficult to detect.
The threat arising from establishing cooperation with an unknown company from Kazakhstan is significant because this country is heavily influenced by Moscow. Russian is still one of the official languages there. The local authorities prefer not to condemn Russian aggression against Ukraine due to concerns about their own independence. The Institute of Central Europe has described Kazakhstan’s behavior as cautious. Kazakh companies are not subject to sanctions for the war initiated by Russia, but, for example, the famous American fast-food chain McDonald’s has banned local franchisees from buying Russian meat. This has led to a lack of economically viable alternative sources of supply, and in November 2022, Kazakh McDonald’s suspended its operations. The strong Russian influence and geopolitical location make Kazakhstan, despite proclaiming its independence in December 1991 and separating from the USSR, still under strong Russian influence. Often, it may be more difficult for Kazakh companies to obtain a 100% confirmation of the ownership structure and the actual beneficiary of the enterprise.
Economic cooperation with Kazakhstan
Kazakhstan plays a significant role in Polish exports. It is Poland’s most important economic partner in Central Asia, accounting for about 80% of Polish trade and the majority of investments in the region. In 2022, the trade turnover between both countries reached 2.6 billion dollars. Poland mainly exports machinery and equipment, chemical and plastic products, as well as agricultural and food products there. From Kazakhstan, we mainly import hydrocarbons. The most important sectors of Polish companies in Kazakhstan are pharmaceutical, construction, and food sectors. They are also involved in the exploration and development of oil and natural gas deposits. Polish companies are also present in the power sector, rail infrastructure, and medical equipment.
The key agreements in economic cooperation are the Agreement between the Government of the Republic of Poland and the Government of the Republic of Kazakhstan on Economic Cooperation dated July 6, 2005, and the agreement on support and mutual protection of investments dated September 21, 1994. The bilateral convention on the avoidance of double taxation and prevention of tax evasion regarding income and property taxes dated September 21, 1995, is also essential. In Astana on December 21, 2015, an agreement was also concluded between Kazakhstan and the European Union and its member states on an extended partnership and cooperation. In mid-June 2023, the IX session of the Polish-Kazakh Intergovernmental Commission for Economic Cooperation took place.
National and EU information sources
Detailed information about the types of economic transactions prohibited by the EU with Belarus and Russia can be found on the European Council’s website: https://www.consilium.europa.eu/. The Official Journal of the European Union at the address: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02014R0269-20220721 contains a list of persons and entities subject to sanctions. The Polish Ministry of Internal Affairs and Administration also maintains an up-to-date registry of entities subject to sanctions, where one can check a counterparty, their connections, reasons for listing, and applied sanctions: https://www.gov.pl/web/mswia/lista-osob-i-podmiotow-objetych-sankcjami.
In the first step of verifying a company from Kazakhstan, you can check whether it is listed in any of the above-mentioned registers. The Regulation (EU) 2022/576 of April 8, 2022, amending Regulation (EU) No. 833/2014 concerning restrictive measures in response to actions undermining or threatening the territorial integrity, sovereignty, and independence of Ukraine is also a valuable source of information.
Economic intelligence: How to check a counterparty from Kazakhstan?
The verification of a counterparty can be entrusted to a professional economic intelligence agency that specializes in carrying out such orders. A private detective in Warsaw, Poznan, Wroclaw, or other cities will know how to obtain the necessary information to verify a current or future counterparty.
The most crucial method of verifying a counterparty and its potential connections with Belarus or Russia is to identify the entity that is its ultimate beneficiary. The next step is to check whether the counterparty is on the sanctions list maintained by the Ministry of Internal Affairs and Administration (MSWiA). Such determinations can be made in the Central Register of Ultimate Beneficiaries maintained by the Minister of Finance: https://crbr.podatki.gov.pl/adcrbr/#/wyszukaj.
Direct inquiry to the counterparty
In case of difficulties in determining the ownership structure of a business partner through available registers, another method of verification within the scope of economic intelligence can be to directly ask the counterparty to confirm who its ultimate beneficiary is. Of course, to authenticate the provided response, you can request the Kazakh entrepreneur to present documents confirming their declarations.
A publicly accessible method of obtaining information about the counterparty is to search the resources of the Internet. Verify the company, check if it has a website, read reviews about it, and maybe come across some publications about it. You can also request references from other companies that have dealt with this counterparty.
If you prefer not to do this on your own for certainty, you can entrust the research to a detective agency specializing in professional economic intelligence. There are more sources of information than just the World Wide Web. For example, Polish-Kazakh chambers of commerce or the Embassy of the Republic of Poland in Astana can provide valuable information.
Polish and EU registers
In the Public Information Bulletin of the Ministry of Entrepreneurship and Technology, as the minister responsible for the economy, there is a register of representations of foreign entrepreneurs. If we find the representation of our counterparty in this register, we can assume that it still exists and operates.
Another such register where you can check the counterparty is the European register of VAT taxpayers (VIES) and the EORI register. Companies and individuals intending to conduct business activity within the European Union must use an EORI number. It is an identification number required in all customs procedures. VIES (VAT Information Exchange System) is a search engine run by the European Commission. It allows checking whether a given entity is registered as making intra-Community transactions, which is necessary, among other things, to apply a 0% VAT rate to a specific transaction. If VIES does not confirm the counterparty’s registration, you can request verification from the tax office of the country where it is based. It is also worth checking whether the company has the necessary permits and certificates if they are required in a given country.
The Register of Insolvent Debtors allows you to check whether a given counterparty is listed there. There are also economic information bureaus that have detailed information about the activities of companies. BIK (Credit Information Bureau) is one such bureau established by the Polish Bank Association. It gathers data on the credit history of bank and credit union customers, as well as non-bank lending companies.
Registers of Entrepreneurs in Kazakhstan
The official state database of companies is available at http://egov.kz/cms/en. However, you can only use it after registration, and providing the Kazakh personal identification number is required. Information about companies includes data about directors and members of all companies and a list of historical changes along with dates. You can request a written description of these changes.
On the other hand, the official website of the Ministry of Finance offers information about the current status of a company. There, you can find its establishment date and taxes paid for the current year and the five previous years. Most importantly, it provides the BIN numbers (Bank Identification Number) for companies. Additionally, there is a possibility to search for taxpayers throughout Kazakhstan (https://opi.dfo.kz/p/ru/dfo-search/opi-search). Browsing is also available in English.
The Kazakhstan Stock Exchange (KASE) provides lists of issuers with basic information about companies. It also contains information about the market and companies in general (https://kase.kz/en). All three mentioned registers can be accessed in Kazakh, Russian, and English.
It is worth thoroughly checking the counterparty
Before conducting a transaction or establishing cooperation with a counterparty from Kazakhstan, it is essential to conduct economic intelligence and thoroughly check it. Especially, pay attention to whether it is connected to Belarus or Russia. Violation of the imposed sanctions on trade with these countries may result in financial penalties of up to 20 million PLN and imprisonment for 3 to 15 years. Apart from that, commercial prudence and due diligence in choosing a counterparty are always required. These are obligations imposed by law on businesses every day. Regardless of the current situation in Eastern Europe, they are imposed by the law on companies as professional entities in commercial transactions, and failure to comply with them carries specific sanctions.
Do you already know how to check a company from Kazakhstan? If not, or if you need to find more detailed information, we can assist you. Contact us.