Local agents and intermediaries are essential for most companies that want to break into new foreign markets. They can help to navigate bureaucratic mazes, understand regional customs, and secure introductions to important decision-makers. It’s important to realize that the qualities that make an intermediary attractive to a company often are the same as those that make the relationship risky.
You know about bribery risk—the serious harm that can follow from an intermediary’s use of corrupt means to pursue a company’s goals. Consequently you need to conduct due diligence on your third parties. But the reality is that not all companies have the same resources available for the task.
The categories of information collected during a due diligence review, and the level of scrutiny and detail required, will vary depending on the risk level of the relationship. But due diligence can be streamlined and shared. All due diligence reports have similar baseline components: beneficial ownership, qualifications, ties to the government and reputational screening. Also, most commercial intermediaries work with several multinational companies. Third parties are often willing to undergo--at their own cost--a single due diligence review that meets international requirements. They can then choose to share the report with all of their business partners, avoiding the wasted effort of duplicative due diligence reviews.
TRACEcertification is an enhanced due diligence review that provides detailed and actionable insights into a candidate’s business operations, reputation and beneficial ownership. In addition, TRACEcertification requires candidates to complete anti-bribery training and adopt a Code of Conduct addressing bribery, if one is not already in place.
The TRACE Intermediary Directory is a free, publicly searchable database of these pre-vetted and trained small- and medium-sized enterprises worldwide. All companies listed in the Intermediary Directory have completed the TRACEcertification review or renewed their verified report within the last year. The intermediaries own their due diligence reports and can share them with all of their business partners. You may request and obtain TRACE Certified Due Diligence reports in the Intermediary Directory at no cost.
There is no such thing as “fool-proof” due diligence. While robust due diligence can help companies understand the level of risk that a third party is likely to bring, a clean past is no guarantee against future misconduct. Relationships have to be managed and suspicious conduct audited. Due diligence is a process, not an event, but a TRACEcertification report is a robust first step relied upon by hundreds of multinatationals.
Pia Vining is Senior Director of Due Diligence at TRACE, a globally recognized anti-bribery business organization. Prior to joining TRACE, Ms. Vining was a litigation specialist in the tax department of a major U.S. law firm. She graduated from the University of Helsinki, Faculty of Law, and holds an LL.M. degree from The George Washington University Law School.
Cross-border business is ripe for corruption. The best way to address corruption issues is to be prepared in advance. Put in place a robust anti-bribery policy and procedures, set clear expectations for personnel, and remove or minimize perverse incentives. Let employees and representatives know that your company really means what the policy says, and give them direct access to compliance professionals. Become aware of local laws, regulations, and business environment. Find local trusted compliance champions to help navigate the complexities of foreign markets.
If you do receive a bribe request, follow a STAR approach:
STOP. Don’t agree to a bribe: even small bribes tend to snowball. Don’t make hasty decisions or seek shortcuts. If a bribe has already been offered, take steps to stop it. Give the bribe taker an opportunity to stop and reconsider (“Are you asking me for a bribe?” or “I’ll have to discuss this with my management”).
THINK …TALK. Consult company policy and procedures. Involve your management, legal and compliance departments. When unclear, determine whether the request is indeed legal and appropriate. Strategize on the best approach.
ACT. Say “No.” Ask to speak to their manager or supervisor. Make it relatable (“I will lose my job” or “U.S. companies are under a microscope from U.S. authorities for overseas bribes”). Be clear that you can only resolve the issue through legal and ethical means. Explain why the bribe taker should care – mention aggressive enforcement by U.S. and local authorities, scrutiny by the media, large fines and prison terms. Deflect – blame strict internal controls, lawyers, internal audit, your boss, etc. for your inflexible no-bribes stance. Seek help from the local American Chamber of Commerce, Business Ombudsman, U.S. Commercial Service, or local government hotlines or law enforcement.
REFLECT. Keep detailed records and supporting documentation. Draw lessons from the incident to avoid similar requests in the future.
Illya Antonenko, Data Protection Officer and Counsel for TRACE, a globally recognized anti-bribery business organization. Prior to joining TRACE, Mr. Antonenko practiced law for fifteen years in a number of leading U.S. law firms and in-house. His practice included assisting clients with FCPA compliance matters and investigations, cross-border transactions, and general corporate issues.
Contributors and Writers are members and associates of the MD/ DC District Export Council. The views expressed do not necessarily represent the opinions of the MD/DC DEC.