Your company sources components from a foreign supplier. Then federal investigators discover the vendor paid bribes to foreign officials. Even if your team did not arrange the payments, your company could face scrutiny under the Foreign Corrupt Practices Act (FCPA).
When can your company face liability?
A company may face liability for bribery by employees or agents acting within the scope of their duties and intending, at least partly, to benefit the company. It may also face exposure for third-party payments that meet the FCPA knowledge standard. This includes cases where the company knew some or all of the payment would fund bribes. Knowledge can include awareness of a high probability that a payment will fund bribery and deliberate efforts to avoid confirming it. A vendor’s misconduct alone does not make its customer liable.
A compliance program alone does not shield a company. Prosecutors may consider its quality, the company’s response, cooperation and steps to prevent future breaches when deciding how to proceed. The DOJ’s FCPA Resource Guide explains these standards.
Which vendor warning signs deserve attention?
Unusually high commissions, vague contracts and unexplained offshore payments can signal corruption risks. Close ties between a vendor and foreign officials may also warrant attention. These warning signs do not prove wrongdoing, but they should prompt risk-based review and further inquiry where needed.
How can you reduce third-party compliance risks?
Risk-based vendor screening can help document your company’s efforts to manage corruption risks. Its value depends on how thoroughly your company designs, implements and follows the process. Practical steps include:
- Screening vendors and relevant owners or intermediaries.
- Including anti-bribery terms and audit rights in contracts.
- Reviewing invoices and payments for legitimate services.
- Monitoring higher-risk relationships and documenting how concerns are addressed.
The SEC’s FCPA overview explains the law’s anti-bribery provisions and separate accounting requirements for public companies. The rules that apply depend partly on your company’s status and conduct.
What should you do when compliance concerns emerge?
Vendor-related bribery concerns can lead to inquiries, fines and reputational harm. An FCPA compliance attorney can help assess third-party risks, review procedures and advise when warning signs emerge.