These Third-Party Vendors Did WHAT?

How is it that third parties, such as manufacturers, subcontractors and resellers, which ideally should enhance and support a company’s performance and brand, have become a volatile weak link in operations management?

The weak link lies in the fact that companies aren’t putting appropriate policies and processes in place or communicating and training third parties on what’s expected of them. Because of this lapse, companies are facing major challenges when it comes to compliance. Consider:

• The majority of Foreign Corrupt Practices Act (FCPA) investigations involve a company’s third parties. In 2009, for instance, 10 of 11 corporate FCPA investigations involved payments made by a third party.
• A poll of delegates attending the American Conference Institute’s FCPA Conference in Washington, D.C., last November revealed that more than 60% have no system in place for monitoring high-risk third parties after they’ve put a contract in place with them.
• Almost 90% of organizations have no technology in place to assess, monitor, manage and report on the FCPA risk of their third parties.

In a highly globalized economy, the FCPA has become a major hot-button issue for U.S. businesses, with huge fines and imprisonment at risk. Just recently, the U.S. Chamber Institute for Legal Reform (ILR), along with 30 domestic and international business groups, sent a letter to the Department of Justice and the SEC, requesting clarification and reforms on the FCPA, which bans U.S. companies from bribing officials overseas to obtain business.

In their letter the groups ask the heads of enforcement of the DOJ and the SEC for additional clarification around the government's enforcement of the FCPA. Specifically, they ask what constitutes “an effective FCPA compliance program” and point out that even with the best compliance program in place, one rogue individual can expose you to FCPA liability. Interestingly, the majority of FCPA investigations involve a company’s third parties, rather than its employees.

With that in mind, here is a “Top 10” list of the lengths that criminal minds will go to, to try to circumvent a company’s anti-bribery/ FCPA programs:

10. “Time for a Raise”

This vendor awarded themselves a multi-million dollar raise and then disguised it as a “finder’s fee.”

9. “Boxed Candy Giveaway”

The only snag here is that “the box of chocolates” cost a little more than usual. The $300,000 boxed chocolates were being given away to government officials and were used to secure lucrative sales contracts with government hospitals.

8. “Care packages”

A typical care package often has homemade goodies, personal grooming items, maybe some magazines to read. These care packages were a little different in that they were cash-filled briefcases and vehicles that were being sent to government officials in order to win construction contracts.

7. “Wining & Dining”

Several million dollars were spent on wining and dining foreign government officials along with numerous paid trips.

6. “Happy Birthday”

A present with a $12,000 price tag for a government decision-maker that included wining and dining at various wineries.

5. “Pocket Change”

A sightseeing junket to Italy for eight government officials who each received $1,000 in “pocket money.”

4. “Tour Paris”

Imagine a trip to see the sights and sounds of Paris. A third-party vendor comped this particular trip for a government official and his wife via a chauffeur-driven vehicle.

3. “Must be 18”

Hiring underage workers and conspiring with a local labor agency to doctor up the age verification documents was uncovered. Local authorities fined the agency, and the global consumer device manufacturer terminated its relationship with the circuit board component manufacturer.

2. “Make it go away”

A third-party Internet manipulator that provides “illegal deletion-for-pay services” bribed employees at an Internet search engine company to erase negative comments about a particular company.

1. “No, let me get this!”

Picking up the tab in this case came to $10,000 spent on dinners, drinks and entertainment for a government official.

All jokes aside, bribery—and how to protect your company from it—continues to be a thorn in the side of most global organizations. Take a look at the following questions: If you can’t answer “yes” with confidence to all three, you and your company may be the next candidate to appearing in a future “Top 10” list for FCPA enforcements.

• Do you have an effective anti-bribery/anti-corruption compliance program in place?
• Is your program consistent, objective and enforceable?
• Are you confident that you can assess and manage the bribery and corruption risk associated with your company’s third parties?

Marie-Charlotte Patterson is the vice president of corporate marketing at Hiperos. She has more than 20 years of international marketing and operational management experience in the software industry, with specific experience in the governance, risk and compliance sectors.