Many compliance practitioners generally view distributors as a part of their third-party risk management program, with most of their attention on the pre-contract phase of the risk management process. Most efforts are typically spent on due diligence, with less on managing the relationship after the contract is signed. However, many facets of a corporate relationship with a distributor are closer to those of other business venture See more +
Many compliance practitioners generally view distributors as a part of their third-party risk management program, with most of their attention on the pre-contract phase of the risk management process. Most efforts are typically spent on due diligence, with less on managing the relationship after the contract is signed. However, many facets of a corporate relationship with a distributor are closer to those of other business venture partners.
One of the issues in any compliance program is the compensation paid to a business venture partner, as FCPA exposure arises when companies pay money – either directly or indirectly – to fund bribe payments. In the traditional intermediary scenario, the company funnels money to a business venture partner, who then passes on some or all of it to the bribe recipient. Often, the payment is disguised. Rethinking approaches to evaluating distributor activities is one of the ways that the increased number of enforcement actions, 2020 FCPA Resource Guide, 2nd edition, and DOJ’s 2020 Update to the Evaluation of Corporate Compliance Programs, have provided insight into how the government interprets and enforces the FCPA. This information, in turn, allows companies to get smarter about FCPA compliance. With a manageable amount of forethought, companies who rely on distributors can create, install and maintain systems that allow them to spend fewer resources to prevent violations more effectively. Moreover, these systems generate tangible proof of a company’s commitment to FCPA compliance by fully operationalizing this aspect of its compliance program.
Many companies have been involved in FCPA enforcement actions because of distributors. This sales side channel does not receive a focus equal to commissioned sales agents. Yet it can present an equally large compliance risk. By using this DAR approach, you will have created a well-thought-out process that will operationalize your compliance program around distributor compensation in a manner that documents your decision-making calculus.
Three key takeaways:
1. The creation of a well-thought-out process that operationalizes your compliance program around distributor compensation in a manner that documents your decision-making calculus is key.
2. Require multiple levels of approval for an out-of-range distributor discount.
3. Tracking distributor discounts globally make your company more efficient. See less -
