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.
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