Due Diligence Across Borders

By Ann Longmore-Etheridge

This is where a due-diligence investigation consultancy can help, and it is especially the case for companies that are starting a business line in a new country without any established physical presence and with a different language. “You won’t have the staff or resources to do the local investigative work,” he notes.

For companies that choose to use a third party to conduct due diligence overseas, it is important not to settle for glorified background checks. “Due diligence is a lot more complicated than a background check, and it gets lumped in with background checks too often. You’re not verifying whether a person went to the school they say that they did; you’re verifying the quality of a person or a company’s character through multiple means. You’re going to end up with a 70-page report on one company versus a two-page criminal or educational background check,” explains Runyan.

In the end, even the 70-page, meticulously documented report might not provide a clear yes or no answer to the question of whether the client should enter into a partnership with the subject company. “It’s not a ‘Hey, you can do business,’ or ‘you can’t.’ It is really up to the company to decide what is acceptable as far as the risk level and what the company’s compliance and risk management policy is,” he says.

Reporting. Companies must keep in mind that under the U.S. Foreign Corrupt Practices Act, they are obligated to report to the U.S. Department of Justice (DOJ) any potential violations that surface. Runyan says that there has been a lot of argument over whether this self-reporting is valuable. In his opinion, if the DOJ hears about possible violations from a whistleblower or from media investigations, it will to be a lot harder for the company to defend itself.

Obviously, it’s hoped that due diligence will save a company from partnering with the type of company that breaks the law, but if it comes to pass that a partner does violate the antibribery laws, the company should self-report when it learns of the problem.



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