No Result
View All Result
SUBSCRIBE | NO FEES, NO PAYWALLS
MANAGE MY SUBSCRIPTION
NEWSLETTER
Corporate Compliance Insights
  • Home
  • About
    • About CCI
    • Writing for CCI
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Career Connection
  • Events
    • Calendar
    • Submit an Event
  • Library
    • Whitepapers & Reports
    • eBooks
    • CCI Press & Compliance Bookshelf
  • Podcasts
  • Videos
  • Subscribe
  • Home
  • About
    • About CCI
    • Writing for CCI
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Career Connection
  • Events
    • Calendar
    • Submit an Event
  • Library
    • Whitepapers & Reports
    • eBooks
    • CCI Press & Compliance Bookshelf
  • Podcasts
  • Videos
  • Subscribe
No Result
View All Result
Corporate Compliance Insights
Home FCPA

DOJ & SEC Raising the Stakes on Third-Party Risk Management

by Michael Volkov
October 24, 2016
in FCPA, Risk
DOJ and SEC compliance expectations continue to grow

This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.

If you review the last 10 years of FCPA enforcement, the unmistakable pattern is rising expectations with regard to corporate compliance programs, particularly with regard to third-party due diligence and risk management. Over the course of numerous enforcement actions, the DOJ and SEC have reached the point where they are questioning not just the conduct of due diligence, but the quality of due diligence.

It is well established that companies have to identify and resolve all red flags, indicating a potential risk of corruption, or else suffer the consequences if bribery occurs. The DOJ and SEC expect high-quality due diligence reviews and assessments of potential third-party intermediaries.

The DOJ and SEC have to be careful here and apply the law fairly in cases where a third party engages in bribery. A post hoc review of a company’s due diligence review has to reflect the standard for due diligence – “reasonable inquiries.” The danger is that the DOJ and SEC could apply a strict liability formulation and use it to second-guess every exercise in discretion.

To this end, companies have to be mindful of a possible post hoc review by the government and document all efforts to identify red flags and to resolve such issues before deciding whether to engage the third party. In recent cases, the DOJ and SEC have cited due diligence reviews and relied on failures of judgment to support an inference of corrupt intent.

As companies implement more robust risk management programs, we can expect to see more post hoc analyses and questioning of due diligence programs. Companies have to design their systems in response to this rising expectation.

A larger percentage of companies are implementing automated due diligence systems. A recent NAVEX Global survey showed that over 80 percent of companies have implemented an automated due diligence system.

Unfortunately, even in these situations, companies have to continue building their system to ensure they rely on reliable data, identify red flags and document their resolution of each and every red flag. If a due diligence system is built on these principles, the DOJ and SEC will have a difficult time questioning a company’s decision to engage a third party.

Companies cannot blindly conduct due diligence, document each step and avoid careful analysis of third-party risks. The recent Och-Ziff enforcement action underscored this point when Och-Ziff conducted due diligence of the Israeli businessman, DRC Partner, and raised serious questions about DRC Partner’s integrity. In fact, the DOJ cited the internal disagreement within Och-Ziff management over whether to engage DRC Partner or not.

The government’s interest in citing internal debates or the manner and quality of resolution of red flags raises some interesting questions. If three officials argue to move forward with a third party and two disagree, can the company move forward, or will the DOJ/SEC cite the two opponents as evidence of an “unresolved” red flag?

To the extent the government continues to rely on such evidence raises a serious question about unintended consequences. Rather than encouraging a robust internal analysis and debate, companies may streamline or modify the internal review function to avoid creating potentially negative evidence of its due diligence program. By discouraging debate, the government may restrict careful consideration of due diligence factors and decisions.

Third-party risk management will continue to be the focus of DOJ and SEC FCPA enforcement actions. Companies have to design their programs in response to increasing scrutiny of third-party due diligence reviews. As robust programs are implemented, companies have to be careful how they design, document and analyze specific risk factors.


Tags: DOJSEC
Previous Post

Vendor Risk Management Solution Checklist

Next Post

Compliance Roundup for September

Michael Volkov

Michael Volkov

Michael-Volkov-leclairryan Michael Volkov is the CEO of The Volkov Law Group LLC, where he provides compliance, internal investigation and white collar defense services.  He can be reached at mvolkov@volkovlaw.com. Michael has extensive experience representing clients on matters involving the Foreign Corrupt Practices Act, the UK Bribery Act, money laundering, Office of Foreign Asset Control (OFAC), export controls, sanctions and International Traffic in Arms, False Claims Act, Congressional investigations, online gambling and regulatory enforcement issues. Michael served for more than 17 years as a federal prosecutor in the U.S. Attorney’s Office in the District of Columbia; for five years as the Chief Crime and Terrorism Counsel for the Senate Judiciary Committee, and Chief Crime, Terrorism and Homeland Security Counsel for the Senate and House Judiciary Committees; and as a Trial Attorney in the Antitrust Division of the U.S. Department of Justice. Michael also maintains a well-known blog: Corruption Crime & Compliance, which is frequently cited by anti-corruption professionals and professionals in the compliance industry.

Related Posts

Fox_DOJ Speeches_f

Analysis of Recent DOJ Statements

by Corporate Compliance Insights
March 23, 2023

DOJ leaders provide insight into agency's plans. Analysis of Recent Statements DOJ Shaping the Future of Corporate Criminal Enforcement What’s...

Fox_2023 ECCP Update_f

2023 Evaluation of Corporate Compliance Programs

by Corporate Compliance Insights
March 23, 2023

Keeping up with 2023 changes to DOJ guidelines. Additions, Deletions & Changes From 2020 2023 Evaluation of Corporate Compliance Programs...

safe harbor

What Is Safe in a World Without Antitrust Safe Harbors?

by Fiona Schaeffer and Adam Di Vincenzo
March 22, 2023

A trio of policy statements dating back to 1993 established the concept of safety zones with regard to information exchanges...

doj-flag-sculpture

Fraud Section’s 2022: A Year of Individual Accountability, Cooperation With Foreign Authorities & Pushing Compliance Programs

by Morgan Lewis
March 15, 2023

The DOJ’s Fraud Section had a banner year in 2022, posting its highest number of convictions in a single year...

Next Post
Efforts to combat financial crime worldwide

Compliance Roundup for September

Compliance Job Interview Q&A

Jump to a Topic

AML Anti-Bribery Anti-Corruption Artificial Intelligence (AI) Automation Banking Board of Directors Board Risk Oversight Business Continuity Planning California Consumer Privacy Act (CCPA) Code of Conduct Communications Management Corporate Culture COVID-19 Cryptocurrency Culture of Ethics Cybercrime Cyber Risk Data Analytics Data Breach Data Governance DOJ Download Due Diligence Enterprise Risk Management (ERM) ESG FCPA Enforcement Actions Financial Crime Financial Crimes Enforcement Network (FinCEN) GDPR HIPAA Know Your Customer (KYC) Machine Learning Monitoring RegTech Reputation Risk Risk Assessment SEC Social Media Risk Supply Chain Technology Third Party Risk Management Tone at the Top Training Whistleblowing
No Result
View All Result

Privacy Policy

Founded in 2010, CCI is the web’s premier global independent news source for compliance, ethics, risk and information security. 

Got a news tip? Get in touch. Want a weekly round-up in your inbox? Sign up for free. No subscription fees, no paywalls. 

Follow Us

Browse Topics:

  • CCI Press
  • Compliance
  • Compliance Podcasts
  • Cybersecurity
  • Data Privacy
  • eBooks Published by CCI
  • Ethics
  • FCPA
  • Featured
  • Financial Services
  • Fraud
  • Governance
  • GRC Vendor News
  • HR Compliance
  • Internal Audit
  • Leadership and Career
  • On Demand Webinars
  • Opinion
  • Resource Library
  • Risk
  • Uncategorized
  • Videos
  • Webinars
  • Well-Being
  • Whitepapers

© 2022 Corporate Compliance Insights

No Result
View All Result
  • Home
  • About
    • About CCI
    • Writing for CCI
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Career Connection
  • Events
    • Calendar
    • Submit an Event
  • Library
    • Whitepapers & Reports
    • eBooks
    • CCI Press & Compliance Bookshelf
  • Podcasts
  • Videos
  • Subscribe

© 2022 Corporate Compliance Insights

Welcome to CCI. This site uses cookies. Please click OK to accept. Privacy Policy
Cookie settingsACCEPT
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
SAVE & ACCEPT