Financial Crime World

Preventing Bribery and Corruption: The Importance of Due Diligence for German Companies

Introduction

In an effort to combat bribery and corruption, the German government is urging companies to conduct thorough due diligence on their third-party business partners, agents, and intermediaries. This obligation is driven by both legal requirements and best practices.

According to Section 25 of the German Criminal Code (StGB), legal entities 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 to prevent corrupt activities.

Anti-Money Laundering Regulations

Germany’s anti-money laundering regulations also require businesses to verify the identity of customers and assess the risks of money laundering and corruption.

Extraterritorial Jurisdiction and International Agreements

For German companies with international operations, particularly those doing business in the United States, the Foreign Corrupt Practices Act (FCPA) and extraterritorial jurisdiction are significant considerations. The FCPA imposes strict requirements on companies to conduct due diligence on foreign business partners to prevent bribery of foreign officials.

Germany is also a signatory to several international anti-corruption agreements, including the United Nations Convention against Corruption (UNCAC) and the OECD Anti-Bribery Convention. These agreements emphasize the importance of due diligence on third parties to prevent corrupt practices.

Corporate Governance Codes

Corporate governance codes in Germany recommend that companies establish due diligence procedures for business relationships and transactions.

Effective Compliance Programs

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

  • Risk assessment
  • Background checks
  • Ongoing monitoring of third-party relationships

International Cooperation

Germany is committed to international cooperation in the fight against bribery and corruption. The country is involved in bilateral agreements and partnerships with numerous countries, as well as EU initiatives aimed at preventing money laundering and enhancing transparency in financial transactions.

Expert Insights

“The obligation to conduct due diligence on third parties is a critical component of anti-corruption compliance in Germany,” said [Name], an expert in the field. “Companies must take reasonable measures to ensure that their business partners and intermediaries adhere to anti-corruption standards and do not engage in corrupt practices that could expose the company to legal and reputational risks.”

Conclusion

Germany’s efforts to prevent bribery and corruption align with its commitment to promoting ethical business practices, combating corruption in international trade, and contributing to global anti-corruption initiatives. By conducting thorough due diligence on third parties, German companies can mitigate their liability and maintain a positive reputation in the global market.