While engagement of third parties is often essential, particularly in markets in which a business has no physical presence, third parties are a business’ single greatest corruption risk: the vast majority of prosecutions and regulatory settlements arise out of payments including third parties.
A business will often face competing civil and criminal law risks when an allegation of corruption is made in relation to a third party. On the one hand, suspending payments may breach the terms of the contract with the third party and lead to a civil claim; on the other hand, there is a risk that if the business continues to make payments it will be putting the third party in funds to pay bribes for which the business could be criminally liable under the UK Bribery Act 2010 or analogous legislation - and which could in turn raise money laundering issues.
The business will need to consider early on any self-reporting requirements under applicable financial regulation or money laundering legislation - and whether it will want to seek consent to deal in potentially tainted funds to provide itself with a defence to money laundering offences. If so, this is likely to impact on the company’s broader reporting strategy.
The business may also need to consider whether it has contractual obligations to disclose the potential issues to counterparties, particularly where the third party is engaged in relation to a contract with a specific counterparty. This is important because under English civil law, contracts procured by bribery are voidable. Accordingly, if a third party, which is deemed to be the company’s agent (whether formally engaged or not), has paid a bribe to secure a contract, that contract may be liable to be set aside by the counterparty. The business may also want to consider bringing claims in relation to the allegations (for example in relation to any employees involved or the third party concerned).