FCPA Due Diligence in Russia

Conducting FCPA due diligence in Russia for cross-border acquisition or joint-venture became paramount. The reason is the increasing focus on enforcement of the US Foreign Corrupt Practices Act (FCPA),  UK Bribery Act and other global anti-corruption laws. 
For buyers, pre-acquisition anti-corruption diligence in Russia can be critical due to several reasons. First of all, under US principles of successor liability, a buyer may be held liable for pre-closing FCPA violations by the target. Of course, if the target was subject to FCPA jurisdiction at the time of the conduct. Secondly, even if pre-acquisition anti-corruption diligence does not reveal evidence of bribery, conducting such a review can help to identify red flags and internal control weaknesses. Therefore, a prospective buyer can incorporate findings into the deal pricing and consider them as part of integration plan of the target. Finally, on a direct liability theory,  a buyer can be charged for any post-closing FCPA violations committed by the acquired company or its agents.
Anti-corruption due diligence Russia
Our pre-acquisition anti-corruption due diligence includes:
  • understanding the tone on the top through discussions and interviews
  • discussing the target company’s corruption risks and compliance efforts with the target’s general counsel, sales and internal audit teams
  • review of the target entity’s anti-corruption compliance program and internal controls not only on the paper but assessing their efficiency
  • reviewing the target company’s sales and financial data, customer and suppliers contracts, distributor and third-party agreements
  • performing a risk-based analysis of the target company’s customer and supplier base
  • performing an audit of some of the target company’s transactions 
  • screening of public and social records and other specific reputation and confidential source information 
  • identification of illicit payments 
INSIGHTS: Companies with ineffective internal controls often face risks of embezzlement and self-dealing by employees, commercial bribery, export control problems. 
Source: A Resource Guide to the FCPA U.S. Foreign Corrupt Practices Act