Third-Party Due Diligence
Definition
The process of verifying the identity, ownership, reputation, and business legitimacy of agents, distributors, joint-venture partners, and other intermediaries. Required under the FCPA and UK Bribery Act because companies can be held liable for corrupt payments made through third parties.
- Verifies
- Identity, ownership, reputation, legitimacy
- Applies to
- Agents, distributors, joint-venture partners
- Legal drivers
- FCPA, UK Bribery Act
- Rationale
- Liability for corrupt payments made via intermediaries
Common questions
Why can a company be liable for a third party's bribe?+
Under statutes like the FCPA and UK Bribery Act, a company can be held responsible when it knew or should have known that payments through an intermediary were likely to fund bribery, even without direct involvement.
What red flags typically trigger deeper due diligence?+
Requests for unusually high commissions, payment to accounts unrelated to the intermediary's home jurisdiction, and refusal to disclose beneficial ownership are common warning signs auditors look for.
Related terms
- Conflict of Interest
- A situation in which a person's private interests, financial, personal, or professional, could improperly affect their exercise of a duty to an...
- FCPA (Foreign Corrupt Practices Act)
- A 1977 US federal statute with two pillars: anti-bribery provisions that prohibit payments to foreign government officials to obtain or retain business,...
- Politically Exposed Person (PEP)
- A person entrusted with a prominent public function, currently or previously, within the applicable definition. Additional measures can also concern family and...
- Sole-Source Justification
- A documented explanation for awarding a contract without competitive bidding, typically claiming that only one supplier can meet a requirement. In bribery...
- UK Bribery Act 2010
- A UK statute creating four offences: paying a bribe, receiving a bribe, bribing a foreign public official, and the corporate offence of...