Conducting Due Diligence Today

For some context, third parties that interact with foreign government officials pose significant risk to companies. As most readers know, the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) published a guide in 2012 collecting various documents associated with the U.S. Foreign Corrupt Practices Act (FCPA), including opinion letters, prosecutions and other documents. The FCPA Guide notes that companies commonly use third parties to conceal the payment of bribes to foreign government officials in international business transactions. Commentators have echoed this concern. Mike Koehler, FCPA guru and law professor, has noted that a significant percentage of anti-bribery violations are based on the conduct of agents, representatives, distributors or even joint venture partners. As prosecutions have increased globally, third parties have frequently been in the cross-hairs.

A Streamlined Process

Over the past few years, in our own work and benchmarking, we have developed a streamlined process that is risk-based, effective and minimizes unnecessary costs. Generally, for most companies with foreign bribery risk, a due diligence process consists of collecting information on the third party — whether it's a customs broker or a joint venture partner — evaluating that information for compliance issues (or red flags), documenting the information and evaluation, and forming a decision on whether the company can enter into the relationship and, if so, under what conditions. This process usually begins with the business' request to conduct due diligence and ends with a report.