We have been doing due diligence for close to a decade. First were larger due diligences involving anti-corruption issues while working at large firms. Now, our firm does mostly third-party service intermediaries and joint ventures. We have seen how companies use a range of different methodologies to conduct due diligence, and different ideas of what it means to have a risk-based process. There is no one-size-fits-all approach, but some methods are significantly cheaper and more aligned to the business than others.

For some context, third parties who interact with foreign government officials pose significant risk to companies. As most readers know, the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) published a guide in 2012 collecting various documents associated with the U.S. Foreign Corrupt Practices Act (FCPA), including opinion letters, prosecutions and other documents. The FCPA Guide notes that companies commonly use third parties to conceal the payment of bribes to foreign government officials in international business transactions. Commentators have echoed this concern. Mike Koehler, FCPA guru and law professor, has noted that a significant percentage of anti-bribery violations are based on the conduct of agents, representatives, distributors or even joint venture partners (https://www.chinalawblog.com/tag/mike-koehler/). As prosecutions have increased globally, third parties have frequently been in the cross-hairs (https://www.ey.com/publication/vwluassets/global-fraud-survey-a-place-for-integrity-12th-global-fraud-survey/$file/ey-12th-global-fraud-survey.pdf).