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Here is how HR can help prevent the missteps that could cost your company big in court.
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Be on the lookout for vendors that accept bribes or bribe others
If third parties do something illegal under the Foreign Corrupt Practices Act (FCPA), like bribe foreign government officials, the employers contracting with those third parties will be held accountable, even if the employers did not bribe anyone themselves.
“Regulators, the press and the public do not often distinguish between the engaging organization and third parties when unethical behaviors or compliance failures are revealed,” according to Randy Stephens, J.D., vice president of advisory services at NAVEX Global, an ethics and compliance software and services firm based in Lake Oswego, Ore. “Organizations cannot afford to take such significant risks with their reputations and bottom line.”
Bribery risks vary by region, so companies investigating whether prospective third-party supply-chain providers are corrupt should conduct a more robust check where the chances of noncompliance are higher, he said.
Stephens is a big believer in continuous monitoring of third parties for bribery and corruption, saying that “if you only do it once a year or when a contract is up for renewal, things can happen in the interim.”
He authored a February 2016 report that found that 32 percent of respondents don’t evaluate third parties before engaging with them. “Organizations that do not conduct due diligence before engaging with third parties are exposing themselves to significant risk,” his report noted.
Risk by Geography
In an interview with SHRM Online, Stephens cited a separate 2014 Trace International report that listed the following countries as the ones where the propensity for bribing the government is greatest, with Nigeria leading the list:
The list of countries posing the least chance of bribing government officials was headed by Ireland:
The Trace International report was developed in collaboration with RAND Corp. Trace International is a nonprofit business association that provides anti-bribery compliance services for multinational companies. RAND Corp. is a nonprofit institution that helps improve policy- and decision-making through research and analysis.
Employers that don’t conduct adequate due diligence and that engage with corrupt third parties risk prosecution under not only the FCPA but also the United Kingdom Bribery Act and the Securities and Exchange Commission’s Office of the Whistleblower, Stephens’ report noted.
Organizations have identified red flags or other negative third-party information through:
Respondents could choose more than one option, so percentages totaled more than 100 percent.
It’s more culturally acceptable in some places abroad to try to bribe government officials, but companies and their contractors can’t pay to play without running afoul of the FCPA, Stephens cautioned. He urged companies to make sure they have done their basic due diligence before engaging with a third party.
Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him @SHRMlegaleditor.
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