Page 70 - U.S. FOREIGN CORRUPT PRACTICES ACT

A Resource Guide to the U.S. Foreign Corrupt Practices Act. Second Edition.

No matter what the disciplinary scheme or Second, companies should have an
potential incentives a company decides to adopt, understanding of the business rationale for
DOJ and SEC will consider whether they are fairly including the third party in the transaction. Among
and consistently applied across the organization. other things, the company should understand the
No executive should be above compliance, no role of and need for the third party and ensure that

employee below compliance, and no person the contract terms specifically describe the services
within an organization deemed too valuable to be to be performed. Additional considerations
disciplined, if warranted. Rewarding good behavior include payment terms and how those payment
and sanctioning bad behavior reinforces a culture of terms compare to typical terms in that industry
compliance and ethics throughout an organization. and country, as well as the timing of the third
party’s introduction to the business. Moreover,
Third-Party Due Diligence and Payments
companies may want to confirm and document
DOJ’s and SEC’s FCPA enforcement actions
that the third party is actually performing the work
demonstrate that third parties, including agents,
for which it is being paid and that its compensation
consultants, and distributors, are commonly used
is commensurate with the work being provided.
to conceal the payment of bribes to foreign officials
Third, companies should undertake some
in international business transactions. Risk-based
form of ongoing monitoring of third-party
due diligence is particularly important with third
relationships. 339 Where appropriate, this may
parties and will also be considered by DOJ and
include updating due diligence periodically,
SEC in assessing the effectiveness of a company’s
exercising audit rights, providing periodic training,
compliance program.
and requesting annual compliance certifications by
Although the degree of appropriate due
the third party.
diligence may vary based on industry, country,
In addition to considering a company’s
size and nature of the transaction, and historical
due diligence on third parties, DOJ and SEC also
relationship with the third party, some guiding
assess whether the company has informed third
principles always apply.
parties of the company’s compliance program
First, as part of risk-based due diligence,
and commitment to ethical and lawful business
companies should understand the qualifications
practices and, where appropriate, whether it has
and associations of its third-party partners,
sought assurances from third parties, through
including its business reputation, and relationship,
certifications and otherwise, of reciprocal
if any, with foreign officials. The degree of scrutiny
commitments. These can be meaningful ways to
should increase as red flags surface.
mitigate third-party risk.

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