Difficult Due Diligence on Overseas Intermediaries

Under the Foreign Corrupt Practices Act, if the agent of a company pays or offers to pay a bribe to a foreign official in order to help secure business, the company itself can be held responsible. Given the magnitude of the potential liability, it is crucial to know something about the background of the person or entity your company is considering to represent you abroad.

The author runs through a short list of hypothetical wrongdoings an intermediary might be discovered to have done, and assesses whether each is a deal-breaker. When the issues are not routine or straightforward, you need to be able to base your decision on a full assessment of the relevant circumstances, taking into consideration not only the nature of the assignment and the history of the potential intermediary, but also the balance between your company’s tolerance for risk, the urgency of the project, and the possibility of alternative courses of action. Protocols and standards for review are necessary, in part to show that your company has a compliance program in case something goes wrong.

Each decision regarding an intermediary must be adequately documented. The documentation should include the nature of the work the intermediary will be performing and the business justification for the engagement.

This would include such issues as whether other candidates were considered, whether there are employees who could fulfill the same role, and the resources the intermediary has to carry out the task.