In the previous installment in this series, we discussed the importance of building privilege protections into the structure of a cross-border investigation. Those protections matter most when an investigation becomes complex, fact-sensitive, and dependent on information held across different entities and jurisdictions. That is often the case when allegations involve third parties.
For many companies operating across the Middle East and Africa, third parties are essential to doing business. Distributors, sales agents, resellers, consultants, logistics providers, customs brokers, and other intermediaries often help companies access markets, navigate local requirements, and develop and maintain customer relationships. But those same relationships can also create significant compliance risks.
Regulators expect companies to understand and mitigate risks created by third parties acting on their behalf. Under many anti-corruption and fraud enforcement regimes, including those enforced by U.S. and UK authorities, companies can face liability where third parties engage in misconduct while facilitating the company’s business. As a result, misconduct by a distributor, consultant, agent, or intermediary can become the company’s problem, creating serious regulatory, financial, and reputational consequences.
Companies therefore need to think about third-party risk at three stages: (1) before the relationship begins; (2) while the relationship is ongoing; and (3) when the allegations arise. This article takes a closer look at each of those stages and provides recommendations and tips about how to best approach each.
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