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How Can I Control My Third Parties?

ControlThirdParties [1]Anti-corruption compliance is an increasingly important topic in Latin America, and companies in the region are starting to ask the question – how can I control my third parties? Sometimes, for FCPA practitioners, it is good to go back to basics.

Under the FCPA, liability can be created when companies or their officials make payments indirectly to foreign officials through agents, consultants, distributors, lawyers, accountants, customs brokers, or any other intermediary.  Liability arises if the company or individual knows that the third party will make the payment, authorizes the third party to do so, consciously disregards red flags suggesting the possibility of corrupt payments, or (for publicly listed companies in the United States) fails to put in place controls designed to prevent third party bribes.

FCPAméricas has discussed third party due diligence in the past, such as how to manage due diligence pushback in Latin America (here [2]), important provisions for contracts with Latin American third parties (here [3]), and how to transfer third party due diligence responsibility to business units (here [4]).

Here is an overview of steps that companies might take when developing due diligence and monitoring strategies for third parties:

The exact safeguards that a company applies will reflect the levels of risk created by each third party. This requires a risk analysis [5]. Determinations on how much due diligence is enough are guided by a series of principles, as discussed by FCPAméricas here [6].

If you have other safeguards to add to this list, please include them in the Comment section of this post or e-mail them in.

Here is a selection of other posts that can guide your third party due diligence and monitoring program:

The Master List of Third Party Red Flags [7]

Avoiding Pitfalls in Audit Rights Clauses in Latin America Third Party Contracts [8]

Eli Lilly’s Distributor in Brazil: The Non-Obvious FCPA Risk [9]

Detecting Phantom Vendors [10]

Third Party Red Flags and Latin America [11]

The opinions expressed in this post are those of the author in his or her individual capacity, and do not necessarily represent the views of anyone else, including the entities with which the author is affiliated, the author`s employers, other contributors, FCPAméricas, or its advertisers. The information in the FCPAméricas blog is intended for public discussion and educational purposes only. It is not intended to provide legal advice to its readers and does not create an attorney-client relationship. It does not seek to describe or convey the quality of legal services. FCPAméricas encourages readers to seek qualified legal counsel regarding anti-corruption laws or any other legal issue. FCPAméricas gives permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author and to FCPAméricas LLC.

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