Tokyo Dispute Resolution and Crisis Management Newsletter - July 2016

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FCPA Best Practices -

The Risks Posed by Third Parties and the Importance of Third-Party Audits -

Introduction -

Since 2010, the United States government has extracted just shy of $5 billion in corporate penalties for violations of the Foreign Corrupt Practices Act (“FCPA”), and a significant majority of those cases involved misconduct by third parties such as intermediaries, agents, distributors, brokers, consultants, and channel partners. Global enforcement numbers exhibit a similar trend: three out of four foreign bribery cases involved the use of third parties. If you are not worried about what third parties are doing on your company’s behalf, you should be.

It is, of course, often difficult to know with any degree of certainty what a third party is doing, especially in unfamiliar foreign jurisdictions. Obtaining and exercising audit rights over third parties is time-consuming and expensive, especially for companies that have thousands of third parties. Those challenges lead many companies to avoid audit rights altogether. But becoming paralyzed at the enormity of the task is a mistake that could prove exponentially more costly.

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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. Attorney Advertising.

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