Third Party Due Diligence

Foreign Agent Activity.

Many companies doing business in a foreign country retain a local individual or company to help them conduct business. Although these foreign agents may provide entirely legitimate advice regarding local customs and procedures and may help facilitate business transactions, companies should be aware of the risks involved in engaging third-party agents or intermediaries. The fact that a bribe is paid by a third party does not eliminate the potential for criminal or civil FCPA liability.The FCPA expressly prohibits corrupt payments made through third parties or intermediaries and will hold the company liable.

Ongoing Monitoring.

Third parties and acquisitions are often the most vulnerable area for FCPA violations. The DOJ and SEC recommend ongoing monitoring of vendors, distributors and partners. Software is available to conduct background checks, monitor business transactions, identify red flags and organize your company’s due diligence efforts.

Third Party Training.

New employees and new third parties should receive compliance training within the first 90 days of employment or business agreement. Third Parties and Intermediaries must be included with compliance training. They should receive the Corporate Code of Business Conduct and Ethics as well as agree to comply with the companies core values. It is crucial the company demonstrates a sincere effort to bring continuous awareness to their third parties, subsidiaries, vendors, distributors, and any entity contributing to the business transactions.

Liability for Subsidiaries.

The DOJ and the SEC make it very clear parent companies will be held liable for the criminal acts of the subsidiaries. In addition, the FCPA may hold a company liable for the past criminal behavior of their acquisitions. This is referred to as the “successor liability” and it has become a high risk area for violations of the FCPA. Due diligence of potential acquisitions should apply the corporate FCPA compliance training efforts.