Perform rigorous background testing. Regulators believe that companies that are showing sound diligence in their anti-fraud efforts are more supportive. This is especially important when potential third-party relationships are verified. In its FCPA resource guide, the SEC explicitly states that “in the context of risk-based due diligence, companies should understand the qualifications and associations of third-party partners, including reputation and relationships with foreign officials, including reputation and relations with foreign officials,” adding later. “The level of control should increase when red flags appear.” 7 This language should serve as a strong motivation for executives to ensure that their companies are currently conducting substantive audits of third parties and that they have good reason to rely on the rigour of their screening process. In 2014, we saw significant enforcement actions of the FCPA with the participation of third parties. The Alstom case is certainly jumping to the side to get the second highest fine ever imposed by the DoJ: about $773 million. The charge was that Alstom paid about $75 million in consulting fees to third parties to secure billions of projects in the Bahamas, Indonesia, Saudi Arabia and Taiwan. This is a good example of a company that uses TPIs to stimulate business in countries that have historically been difficult to penetrate. It`s also a good example of how intermediate relationships can create regulatory risks for your organization.
McCann: The Foreign Corrupt Practices Act (“FCPA” or “Act”) has been on the books since 1977, but U.S. regulators have only imposed it aggressively for a decade. Given the success of these enforcement measures, I do not see the decline in enforcement for the foreseeable future. While the IPTs themselves do not advance the trend towards implementation, we see a coherent issue of participation in the ICT in corrupt activities with foreign officials. This is also supported by a recent OECD study, in which we find that more than 75% of bribery incidents involve payments through intermediaries. This is a great statistic that illustrates the risks inherent in intermediate relationships. Third-party reviews are a powerful tool for businesses that want to take advantage of the commercial benefits of interacting with TPs while keeping a close eye on their business activities and compliance efforts.