5 Tips to Avoid FCPA Violations Once And For All

Posted In Business Insider, DigitalOlympus Feature Articles - By Josh Cole On Monday, July 22nd, 2013 With 0 Comments

A cursory due diligence investigation on international business partners is no longer enough. The Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) are clearly making an effort to transform due diligence into a leading practice for all American companies operating in an international jurisdiction. US authorities have made the traditional approach to due diligence almost obsolete.

Companies should be enhancing their FCPA compliance programs as a result of the latest actions taken by the SEC and the DOJ. In one of our recent articles regarding FCPA misconducts we talked about the importance of having a solid compliance program tailored for each company, especially if that program was designed by a firm specialized in due diligence.

How to Successfully Approach Due Diligence?

There are some common due diligence pitfalls you need to avoid, as well as a few key recommendations on how to approach due diligence investigations, that every business leader ought to know about. Based on Deloitte Insights published on the Wall Street Journal, we provide you with a list of items to take into consideration when conducting due diligence investigations:

  • It’s all about timing: Companies need to proactively change their compliance programs to prevent FCPA violations. The goal is to mitigate risks and timely identify possible irregularities, not wait to conduct remedial actions as a last resort. Voluntary (but ill-timed) due diligence investigations after the alleged violations have occurred no longer suffice for the SEC and the DOJ.

  • It must be thorough: Deloitte underscored that failing to sufficiently verify information provided by potential international business partners has become a common factor in FCPA cases. To avoid insufficient due diligence is important to implement a risk-based approach to corroborate information and pinpoint irregularities in order to properly take action on possible red flags.

  • Proactive action is the key: If a compliance program is in place and a red flag is identified, then the company must take action to adequately resolve any issues that might have come to the surface. Whether this involves a deeper investigation or further inquiries, nowadays the SEC and the DOJ expect resolution when organizations successfully identify possible FCPA violations.

  • Avoid cookie cutter compliance programs: Depending on the country, the industry and the level of risk, each due diligence investigation must be conducted differently. There has to be a standardized FCPA policy in your organization, however applying a “one size-fits-all” approach dilutes the effectiveness of the compliance program.

  • Employ third party professionals: Many organizations frequently rely only on their own employees to perform due diligence on their potential international business partners. This is a mistake. If any FCPA misconduct is suspected, it’s best to work with a firm specialized in due diligence investigations.

While due diligence might be time-consuming, particularly when starting up an international business relationship, the latest actions by the SEC and the DOJ have proven how important it is to take the time to develop a solid FCPA compliance program. Failing to conduct proper due diligence investigations can have disastrous repercussions for companies venturing into overseas markets.

What other tips would you recommend to avoid FCPA misconducts? Please leave your comments below.

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