Financial and Monetary Manipulations in Collaborative Business Operations
In a significant development, Naval Vessels Lürssen (NVL) and the British tech company Kraken Technology Group have formed a joint venture in Germany. The production facilities are based at NVL's site Blohm+Voss in Hamburg.
However, the collaboration presents enhanced corruption risks, including the risk of criminal liability for bribery and money laundering offences. To mitigate these risks, it's crucial to ensure the joint venture implements effective anti-bribery and corruption (ABC) procedures.
Before formation, the governance framework of the joint venture should be structured, ensuring disputes amongst shareholders can be resolved. The procedures should reflect the risk tolerance of the respective shareholders.
The ABC provisions of the joint venture or shareholders' agreement and associated documents are important. These provisions should require the other JV partner to notify the participants of any ABC allegations or investigations, provide all relevant information, and allow an audit if issues arise.
Under the UK Bribery Act, a joint venture partner may be liable where the person paying the bribe is providing services to the joint venture partner, and there was an intention to obtain or retain an advantage for the joint venture partner. Therefore, understanding the JV partner's approach to ABC risk and any previous ABC issues is fundamental to assessing the risks of an ongoing relationship.
Particular focus is required in relation to training employees to consistently identify and escalate ABC issues, third-party due diligence and monitoring, and how issues are investigated. Ensuring the JV implements effective ABC procedures is essential. The procedures should be designed to manage the risks identified in due diligence, and be informed by an ongoing risk assessment.
For public companies, the Foreign Corrupt Practices Act (FCPA) holds a company liable if its subsidiaries or affiliates, including foreign subsidiaries and joint ventures, comply with the accounting provisions of the FCPA. The 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, and only requires good faith efforts to cause the minority-owned subsidiary or affiliate to devise and maintain an appropriate compliance program and system of internal accounting controls consistent with the company's own obligations.
In Germany, a company can face financial penalties of up to €10 million under the German Administrative Offences Act for bribery offenses committed by a member of senior management or for failing to implement appropriate measures to prevent bribery. Dealing with proceeds of suspected bribery may give rise to offences under the UK Proceeds of Crime Act 2002, regardless of whether the joint venture partner would be liable for the underlying bribery.
Careful due diligence on any assets and businesses to be transferred to the JV is important to assess the risk of losing tainted assets, key contracts being terminated, and of future investigations or litigation. Risk-based anti-bribery and corruption due diligence should be undertaken in relation to the proposed joint venture, its partners, operating jurisdictions, and assets or business to be transferred to the joint venture.
Effective ABC compliance procedures should be adopted and followed by the joint venture during its life. Bribery issues can lead to reputational and financial risks, such as a significant risk to value, criminal or regulatory investigations, and civil disputes. It is important to consider how compliance obligations should be recorded in the agreement between the joint venture participants.
In conclusion, the joint venture between Naval Vessels Lürssen and Kraken Technology Group must prioritize ABC compliance to navigate the enhanced corruption risks associated with their collaboration. By implementing effective procedures, conducting thorough due diligence, and staying vigilant to potential issues, they can mitigate these risks and ensure a successful partnership.
