Germany Stresses Importance of Due Diligence on Third Parties to Prevent Bribery and Corruption

Conducting Thorough Due Diligence on Third-Party Business Partners

In an effort to curb bribery and corruption, German companies are being urged to conduct thorough due diligence on their third-party business partners and intermediaries. This comes as the country’s legal framework and international agreements emphasize the need for companies to take reasonable measures to prevent corrupt activities.

Liability and Due Diligence

According to Section 25 of Germany’s Criminal Code (StGB), companies can be held criminally liable for offenses committed by their representatives. To mitigate this liability, companies are expected to exercise reasonable care and supervision, including conducting due diligence on third parties.

Anti-Money Laundering Regulations

Anti-money laundering regulations in Germany also require businesses to conduct customer due diligence (CDD) when establishing relationships with customers, including third parties. This includes verifying the identity of the customer and assessing the risks of money laundering and corruption.

International Obligations

German companies with international operations are subject to the extraterritorial reach of laws such as the Foreign Corrupt Practices Act (FCPA), which imposes strict requirements on companies to conduct due diligence on foreign business partners to prevent bribery of foreign officials.

Corporate Governance Codes

Corporate governance codes in Germany recommend that companies establish due diligence procedures for business relationships and transactions, while international anti-corruption agreements like the United Nations Convention against Corruption (UNCAC) and the OECD Anti-Bribery Convention emphasize the importance of due diligence on third parties to prevent corrupt practices.

Effective Compliance Programs

Effective compliance programs in German companies often include due diligence on third parties as a fundamental element. This involves:

• A risk assessment
• Background checks
• Ongoing monitoring of factors such as:
  • The third party’s reputation
  • Track record
  • Financial stability
  • Compliance with anti-corruption laws

International Cooperation

Germany is also committed to international cooperation in the fight against bribery and corruption, participating in various treaties and agreements aimed at combating corrupt practices and promoting transparency in international business. These include:

• OECD Anti-Bribery Convention
• UNCAC
• G20 Anti-Corruption Working Group
• Financial Action Task Force (FATF)
• Mutual Legal Assistance Treaties (MLATs)
• Bilateral agreements with other countries
• EU initiatives

Promoting Ethical Business Practices

As part of its efforts to promote ethical business practices and combat corruption in international trade, Germany is working closely with other nations and international organizations to:

• Share best practices
• Exchange information
• Collaborate on anti-corruption initiatives at the global level