Considerations on Bribery and Money Laundering Schemes in the Context of Joint Business Endeavors
In the complex world of business, joint ventures (JVs) can offer a wealth of opportunities. However, they also come with their own set of risks, particularly in the realm of anti-bribery and corruption (ABC). Understanding these risks is crucial for any company embarking on a JV. The Department of Justice (DOJ) recognizes that companies may not have the same level of control over a minority-owned subsidiary or affiliate as they do over a majority or wholly owned entity. This is a significant consideration, as companies can face penalties of up to €10 million under the German Administrative Offences Act for bribery offenses or failure to implement appropriate measures to prevent bribery. In the UK, the Bribery Act 2010 holds a commercial organization liable if a person associated with it bribes another person to obtain or retain business or business advantage. This extends to JVs or JV partners carrying on a business or part of a business in the UK, as stated in Section 7 of the UK Bribery Act. To mitigate these risks, due diligence, effective compliance procedures, and documentary provisions are key areas to address. In Germany, while there is no clear guidance on due diligence or compliance measures for JVs, it is prudent to address these risks. In the UK and US, public companies are responsible for ensuring that subsidiaries or affiliates comply with the accounting provisions of the Foreign Corrupt Practices Act (FCPA) and the Bribery Act, respectively. Careful due diligence on assets and businesses to be transferred to a JV can help assess the risk of losing tainted assets, terminated key contracts, and future investigations or litigation. It is also essential to understand the JV partner's approach to ABC risk and any previous ABC issues. Ensuring the JV implements effective ABC procedures is essential, with a focus on training employees, third-party due diligence and monitoring, and periodic assessments of the effectiveness of ABC procedures. Joint ventures can present enhanced corruption and money laundering risks. Money laundering risks can arise from bribery issues, and consent can be sought from the UK National Crime Agency where money laundering is an issue. Understanding the inherent risk in the relevant jurisdiction, particularly when entering a new market, and drilling down on the beneficial ownership of the local partner, as well as their political/government connections, are crucial steps in managing these risks. Several joint ventures in sectors like construction, energy, and telecommunications have faced corruption scandals, with companies such as Siemens and Petrobras involved in past years. Measures taken to mitigate risks include implementing stricter compliance programs, enhanced due diligence, employee training, whistleblower mechanisms, and stronger internal controls. Regulators and enforcement agencies have taken action against companies for bribery issues in joint ventures. Companies entering into a joint venture could be criminally liable for the corrupt actions of their partners, the joint venture itself, or third parties engaged by the joint venture. The ABC provisions of the joint venture or shareholders' agreement and associated documents are important, including the obligation for the other JV partner to notify participants of any ABC allegations or investigations, provide all relevant information, and allow audits if issues arise. In some cases, even a non-majority interest can render an entity liable for the acts committed by a joint venture in which it owns less than a 50% interest. Therefore, it is essential for companies to be vigilant and proactive in managing ABC risks in their joint ventures.
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