“Reasonable” Due Diligence in the Pursuit of Regulatory Compliance
Companies doing business or looking to do business in foreign countries need to “know” their third parties and also “prepare” themselves to do business ethically and within the confines of foreign legal due diligence requirements. Heightened enforcement surrounding the Foreign Corrupt Practices Act and other similar legal provisions around the world, as well as the risks associated with an increasingly global business environment necessitate this. Achieving this end efficiently and effectively is not easy, especially when trying to do so in the increasingly complex legal landscape of laws and professional regulations that often differ by country. Demonstrating proper investigative process and duty of care in vetting third-party intermediaries is critical to both achieving regulatory compliance and securing your company’s financial & reputational bottom line.
When exploring potential third-party business relationships, companies must be equipped with relevant and timely intelligence to make strategic business decisions. If you are looking to enter new foreign markets, then you need preemptory due diligence expertise in preparing your firm to do business and investigative 3rd party due diligence expertise in evaluating the companies you are planning to do business with. Combining a global presence with local knowledge that enables clients to make well-informed business decisions. Look for a fixed-scope, fixed-cost due diligence services with predictable timelines that support a risk-based due diligence approach to third party management.
Access Your Business Risk
Businesses must assess the risk of FCPA violations Some questions to consider are:
• What kind of business does your company do?
• Do you conduct business through your own employees, through agents, distributors and intermediaries, through joint ventures- all of the above?
• Do you need to get permits or qualify products for sale? Do you ship through freight forwarders and use customs agents?
• Do you deal with universities, or use professors in an advisory capacity, or deal with doctors or hospitals?
• In many countries education/ healthcare are government run and all employees, including doctors and professors, are government officials under the FCPA.
These are just a few questions amongst many to ask in accessing your organizational risk.
What is the FCPA?
It is a US statute that criminalizes bribery of a foreign official for the purpose of obtaining or retaining business or an improper business advantage by inducing the foreign official to:
• Act or make a decision in his or her official capacity.
• Exercise influence to affect an act or decision of a government.
• Violate a lawful duty.
• Confer an improper advantage upon the payor of the bribe. Bribes can include an offer or payment of “anything of value,” including, but not limited to money, gifts, services, charitable donations, corporate hospitality and entertainment, the promise of future work or employment, or the award of a contract or business.
“Foreign officials” may include government employees, politicians holding elected office, candidates for elected office, employees of “public international organizations” (e.g., the United Nations), employees of a political party, employees of a company owned or controlled by a government, or an agent or consultant intermediary working on behalf of a foreign official.
Other anti-corruption laws may define foreign officials or foreign public officials more expansively.
Noteworthy Trend: FCPA Compliance & Ethics. USA Outpaced?
Non-U.S. enforcement actions concerning bribery of foreign officials outpaced U.S. enforcement actions for the first time. The widely held perception has been that only the United States enforces its anticorruption laws. The recently released report indicates enforcement by overseas regulators is on the rise, doubling since 2012, beginning to match the past decade of heightened enforcement of the U.S. Foreign Corrupt Practices Act. Trace International’s Global Enforcement Report
Tips to Get Ahead of the Game, Be Proactive, Prepare Your Business!
Your organizational program requires a Standalone International Anti-Corruption Compliance policy, and an Executive who is Accountable for the “Tone at the Top”. Any company doing international business, should enact a standalone FCPA Compliance Policy. Do not rely on having a few paragraphs about international corruption buried in your general Standards of Business Conduct; it is no longer sufficient.
Don’t Wait Until the Last Minute.
Prepare your company to do business with entities who have due diligence requirements. Most corporations now have stringent due diligence requirements, you can be prepared ahead for this and position your business as a first in line option for contract opportunities. Specializing in emerging markets, Mzuzah bilateral advisory provides legal and business support services to navigate new markets, unfamiliar terrains to avoid common pitfalls.
Doyin Oluntona, Esq
Co-Founder, Mzuzah Inc. (Bilateral Advisory) & Uturn Africa
An Attorney focused on Bilateral, Legal/Business & CSR Issues