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5 Reasons FCPA Compliance Assessments are Essential to Vendor Relationships

Modern business has spread its reaches far and wide, and it is far from uncommon for an organization to have partners all around the globe. Now, businesses across dozens of industries rely on goods and services from vendors based thousands of miles away.

Along with the globalization of business comes an increased risk of impropriety in professional dealings. In response to these issues, the United States enacted the Foreign Corrupt Practices Act (FCPA) in 1977. Designed to protect against corruption, the law forbids organizations and individuals from bribing foreign officials for the purpose of benefiting a business arrangement.

Here are 5 reasons your organization needs a comprehensive third-party FCPA compliance assessment program.

1. The vast majority of FCPA cases use a third party

While most businesses have processes in place to protect against internal corruption, approximately 90% of FCPA cases involve the use of a third party (Stanford Law School). It is not enough to ensure your own employees are above reproach. Working with third-party vendors - without proper due diligence protections in place - leaves your organization equally vulnerable to FCPA non-compliance.

Remaining proactive about mitigating risk in dealings with third-party vendors is critical to protecting your business against viability in the case of corruption. FCPA promises legal action against organizations that turn a blind eye to corruption, leaving your organization at risk of compromise if you fail to thoroughly vet your vendors.

2. FCPA assessments encourage profitable and honest business practices

Neglecting to assess a potential vendor’s FCPA compliance program leaves your organization vulnerable to failed business relationships when and if their negligence becomes apparent. The dissolution of an important partnership slows productivity and sets your organization back on time and profit.

Implementing a comprehensive assessment of vendor FCPA compliance helps address potential risks from the get-go, saving all parties time and money. Ensuring both sides of a vendor contract are in adherence to FCPA standards promotes transparency and security throughout the life of the partnership, in turn leading to honest and profitable results.

3. FCPA assessments gather crucial information about vendor standards

FCPA requires that all parties involved with an organization guilty of corruption prove they performed proper due diligence and did not turn a blind eye to wrongdoing. In the case of third-party vendor relationships, your organization will be left particularly vulnerable to suspicion should one of your partners be found to be corrupt.

Initial compliance assessments ask important questions about internal processes, documentation, and safeguards against corruption to ensure your vendors adhere to the same high standards you do. A comprehensive FCPA assessment will seek out and identify any red flags before your organization enters into a contractual business relationship.

4. FCPA due diligence protects organizational integrity

Being caught in the middle of a corruption scandal can have catastrophic effects on a business. If one of your vendors is caught in FCPA non-compliance, your organization may be held criminally liable for their misconduct. Even if you are spared charges, your reputation as a trustworthy business would be critically damaged.

Completing thorough due diligence assessments of every potential vendor’s FCPA compliance program is a necessary step in protecting your organization from legal action in the event of wrongdoing. Taking the initial step to check that your vendors operate in compliance with FCPA standards ensures that your organization will not suffer the widespread repercussions that come along with corruption.

5. Initial FCPA assessments set the standard for routine monitoring

The job of due diligence is far from done after the initial assessment is complete. The US Department of Justice (DOJ) and Securities and Exchange Commission (SEC), the entities responsible for enforcing FCPA compliance, demand that initial FCPA questionnaires are not a box to check. Instead, in FCPA cases, the DOJ and SEC seek proof that an organization conducted regular and repeated checks to ensure that vendors remain up to standard.

Completing a thorough first questionnaire before a vendor is chosen sets the standard for continual assessment throughout the life of the business relationship. Making sure that your evaluation is sufficiently comprehensive will make future monitoring more effective at identifying and mitigating risk.

Privva makes evaluating FCPA compliance for third-party vendors simple and effective. If you’re ready to streamline your risk management process, reach out today to see how Privva can help.

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