Financial and monetary manipulations in partnership businesses: Evaluating potential bribery and money laundering risks
In the complex world of business, ensuring effective anti-bribery and corruption (ABC) procedures is essential, especially in countries like Germany and the UK.
In Germany, a focus on training employees, third-party due diligence, monitoring, and investigation procedures is crucial. Understanding the approach of a potential JV partner to ABC risks and any previous issues is also vital in assessing the risks of an ongoing relationship. The ABC provisions of the joint venture or shareholders' agreement and associated documents are important, including the obligation for the JV partner to notify the participants of any ABC allegations or investigations, provide all relevant information, and allow an audit if issues arise.
On the other side of the Channel, the UK Serious Fraud Office may investigate regardless of technicalities of the application of the Bribery Act, potentially causing negative impacts even if a prosecution is not successful. A JV or JV partner carrying on a business or part of a business in the UK may be subject to Section 7 of the UK Bribery Act.
Money laundering risks can result from bribery issues in the UK, and dealing with proceeds of suspected bribery may give rise to offenses under the UK Proceeds of Crime Act 2002 (POCA).
Regulators and enforcement agencies, such as the Securities and Exchange Commission (SEC) in the US, have taken action against companies for bribery-related offenses in joint ventures. Siemens (Germany) and Walmart (United States) are among companies penalized by the SEC in recent years for violations of the Foreign Corrupt Practices Act's accounting provisions, with bribery and accounting irregularities occurring in countries including Argentina, Venezuela, and Mexico.
For public companies in the US, the Foreign Corrupt Practices Act (FCPA) requires them to ensure that subsidiaries or affiliates comply with the accounting provisions of the FCPA, even if they are foreign joint ventures. The Department of Justice (DOJ) recognizes that companies may not be able to exercise the same level of control over a minority-owned subsidiary or affiliate as they do over a majority or wholly owned entity.
Due diligence, effective ABC compliance procedures, and documentary provisions should be considered to address and mitigate these risks in joint ventures. Careful due diligence on assets and businesses to be transferred to a joint venture is important to assess the risk of losing tainted assets, key contracts being terminated, and of future investigations or litigation.
It is advisable to review the draft bill on German corporate criminal law for potential updates on corporate liability for bribery under the German Criminal Code. Ensuring compliance with ABC regulations can help businesses avoid the significant reputational and financial risks associated with bribery issues, including significant risk to value, criminal or regulatory investigations, and civil disputes.
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