Qui Facit per Alium, Facit per Se: Best Practices for Third-Party Due Diligence

October 22, 2014

The FCPA, enacted by Congress in 1977, makes it a crime to bribe foreign government officials, either directly or indirectly, in order to obtain or retain business. Thus, pursuant to the FCPA, it is unlawful to make a payment to a third party, i.e., an intermediary, if a company knows or should know that all or a portion of the payment will go directly or indirectly to a foreign official in order to obtain or retain business. For many companies, especially those with operations abroad, intermediaries are a critical part of their business operations. It is through them that they are able to carry out their day-today operations. As the list of typical intermediaries below illustrates, the number of intermediaries most companies are likely to have can be vast and extensive:

  • Subsidiaries and Affiliates
  • Consultants 
  • Sales Representatives 
  • Distributers 
  • Subcontractors 
  • Franchises 
  • Joint Venture Partners 
  • Agents
  • Lawyers
  • Accountants

Nearly all of the alleged bribes in the FCPA enforcement actions commenced by the DOJ and SEC this year – totaling almost $600 million in corporate fines – plainly illustrate that a company’s failure to know, monitor and audit its intermediaries can have significant consequences for a company and its senior executives.

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