Building a Due Diligence Infrastructure (Part IV of IV)

by Michael Volkov

A due diligence infrastructure is designed to demonstrate a company’s good faith commitment to compliance with anti-corruption laws by: identifying corruption risks; and mitigating such risks to ensure that the company does not violate the law.

A much simpler way to put it is – a company’s due diligence system is designed to negate any inference of intent to violate the FCPA.   A due diligence system keyed to this fundamental principle should promote a company’s ethical and law-abiding conduct through its business activities conducted by third parties.

With these critical principles in mind, a due diligence infrastructure requires several components:

(1) An automated system to organize and document the company’s due diligence activities;

(2) A pre-defined set of policies and procedures needed to conduct due diligence, renew due diligence, and define basic, enhanced, and focused due diligence inquiries;

(3) A procedure for effective elevation of third party risks so that compliance, legal, and business managers are able to review and respond to third party risks;

(4) A system for providing and documenting advice and counsel, including written representations and warranties tailored to specific risks, documentation of legal directions, and actions taken based on legal analysis; and

(5) A robust set of requirements for monitoring and auditing third parties through a range of techniques and interventions.

I have tried to present these ideas in a clear and concise manner, but everyone should recognize that this is more than a mouthful and requires a real commitment of time and resources.

In this new age of ethics and compliance, and considering the significance of third party risks, companies are fast moving to employ automated due diligence systems. The reason for that is obvious – a due diligence system requires significant resources and cannot be manually conducted, unless the company is small and has limited resources.

Technology is the great enhancer to ethics and compliance, and automated systems for due diligence are perhaps the most important development in the compliance field in the last five years. For that reason, I have urged companies to define their due diligence needs, carefully consider all available options, and compare each of the solutions to make sure it meets the company’s needs for the foreseeable future.

Second, a company should adopt due diligence policies and procedures to ensure that company managers and employees are well aware of the due diligence program and the specific requirements. It is also important to define in advance the principles that will be applied to the due diligence reviews.

Third, a company has to conduct training on the due diligence program and the responsibilities of each employee to comply with the requirements. This process should include appropriate procedures for elevating third party concerns within the company and making sure that employees know who to notify and what types of issues may become significant relating to a third party.

Fourth, a due diligence infrastructure has to build on advice of counsel for design and adoption of written representations and warranties by third parties, as well as review and approval of specific actions taken.  This is not only with respect to individual third parties, but also with respect to decisions made by the CCO to allocate resources or make general decisions as to ranking and analysis of groups or categories of third parties.

Finally, the CCO has to work closely with legal and the internal auditor to design a monitoring and auditing program that ensures that adequate auditing of third parties is conducted. It is one thing to secure contractual provisions providing audit rights to a company, but it is quite another to exercise those rights in a meaningful fashion.

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.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

Written by:

Michael Volkov

The Volkov Law Group on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.