Avoiding (But Not Hiding From) Third-Party Corruption Risks

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When entering new markets, it is common for companies to seek out and rely on local contacts to help navigate market structures and cultural issues. In some instances it is practically impossible—if not illegal—for a company to enter the foreign market without partnering with a local third party, such as a consultant, agent, broker, distributor, or joint venture. While these relationships are oftentimes entirely legitimate and crucial for successful entry and continued success, they can also expose companies to significant risks under the Foreign Corrupt Practices Act (FCPA), the UK Bribery Act, or other anti-corruption laws. In fact, the vast majority of reported FCPA cases involved third-party intermediaries.

LIABILITY FOR ACTS OF YOUR INTERMEDIARIES -

The FCPA prohibits corrupt payments to foreign officials for the purpose of obtaining or retaining business. Under the statute, both direct and indirect payments are unlawful. The FCPA prevents parties from avoiding liability by putting an intermediary in between themselves and the foreign official. As the Department of Justice (DOJ) and the Securities and Exchange Commission’s (SEC) recent FCPA Resource Guide makes clear: “The fact that a bribe is paid by a third party does not eliminate the potential for criminal or civil FCPA liability.”

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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