Third-Party Due Diligence: Who Was Approved, Who Got Paid, and Who Looked Away

FCPA third party due diligence records connect an intermediary’s ownership and qualifications to the work promised, the money paid and the company’s response to warnings in a Foreign Corrupt Practices Act investigation. A background check identifies connections, while transaction records show what the money bought. If you approved the consultant, processed the commission or questioned the discount, you may know where the company’s explanation stopped matching the transaction.

The Business Reason Behind the Intermediary

The file gives a business reason for hiring the intermediary. If you handled the engagement, you may know whether that reason matched the work.

The business role matters more than the label on the contract. An agent handling clearance, a consultant arranging introductions and a reseller selling to a public customer occupy different places in the transaction. The official controlling a license or purchase can be several steps away from the person receiving the company’s payment. A joint venture adds decisions about ownership and who can authorize payments.

The Justice Department’s September 2024 compliance evaluation asks about the business rationale, compensation, actual performance, exercised audit rights and continuing monitoring. The selection decision matters, but so do the work accepted and the later payments authorized.

In a 2015 speech about the pharmaceutical industry, the Securities and Exchange Commission’s enforcement director identified customs clearance for perishable medicines, licensing and inspections as areas needing attention. A consultant’s background tells only part of that story. The pending clearance, inspection or government purchase explains what the company wanted from the relationship.

FCPA Beneficial Owner Diligence and an Ignored Warning

In FCPA beneficial owner diligence, an ignored warning can expose the gap between an investigation and the decision it was supposed to inform. The Commission order against Mobile TeleSystems, also called MTS, describes the company’s inquiry into the intermediary Takilant:

The warning reached the business before the next decision. The investigator’s report, its recipients and the company’s response connect that warning to what happened next. We find this absurd: MTS commissioned an investigation, got the warning and ignored it.

Goldman Sachs shows how a rejection could coexist with continued business. The Commission found that compliance and intelligence personnel refused to approve a client relationship with an intermediary, partly over concerns about the source of his wealth. Senior bankers continued working with him because they believed he could bring lucrative government business from Malaysia and Abu Dhabi. The Commission also found that a senior banker falsely denied the intermediary’s involvement when an approval committee asked about it.

We look at what happened after the objection as closely as the objection itself. A rejected client relationship and an undisclosed role in a transaction can exist in the same company. The correspondence connecting those decisions is precisely what someone inside the business may recognize.

The Contract, the Commission and the Work

A contract describes what the company agreed to buy. The work product, acceptance records and payment trail show whether that description fits what happened. A consultant’s fee belongs beside the service delivered, the person who approved it and any onward payment to someone with power over the deal.

In its complaint against RAE Systems, the Commission alleged that the RAE-KLH joint venture hired an agent for supposed technical services on a government-affiliated oil project. The complaint alleged that the agent instead made improper payments to employees of a state-owned enterprise affiliated with the Dagang Oil Field. The engagement had a technical description. The alleged use of the money was to pay people on the customer’s side.

The same complaint alleged that sales personnel supported expenses with genuine receipts issued for other transactions. Authentic paper could therefore support a false explanation of a particular payment. For someone in accounts payable, the connection between the receipt and the expense is as important as whether the receipt itself is real.

Under its deferred prosecution agreement, SAP admitted paying commissions that an intermediary promptly forwarded, almost in full, to businesses owned or controlled by a government official, without providing substantive work in return. SAP also admitted engaging two intermediaries on a South African government contract and paying each 14.9 percent of its revenue from that contract. Each payment sat at the maximum rate allowed without significantly higher approval inside the company.

That approval threshold makes the commission design part of the story. We examine why the deal required both intermediaries, what each supposedly contributed and why their payments landed at that rate. The contract, approval and onward transfer describe different parts of the same decision.

The Commission’s separate SAP order found that a consultant never performed services. SAP South Africa’s managing director instructed employees to do the consulting work instead, while the company still paid the intermediary $1.6 million. The employees did the work. The consultant got the money. A completed project could conceal that substitution from anyone looking only at whether the customer received something.

Did the Distributor’s Discount Reach the Customer?

A supplier-approved discount can leave money with a reseller while the end customer pays a higher price. The meaningful comparison connects the discount request, the supplier’s invoice, the reseller’s sale and the final customer’s bill. The approval alone leaves the retained margin out of view.

The Commission found that Microsoft Hungary employees supplied false justifications to obtain additional discounts. Microsoft lacked sufficient procedures to check whether the requests were legitimate and whether the discounts reached end customers. The excess discounts generated money used for improper payments through resellers and other third parties.

The order also described a Turkish government transaction in which an additional discount lacked evidence of services by the system integrator. The authorized reseller told Microsoft that it had performed the services itself. The Commission found no evidence that the additional discount reached the government customer. That makes the customer’s price and the identity of the actual service provider central to the inquiry.

The pharmaceutical speech identifies the same commercial problem: a distributor can turn its margin into a fund for bribes, while the extra layer of cash flow helps disguise the payments as business expenses. For sales and distributor employees, the price the customer actually paid can supply the missing comparison. For finance staff, the question may begin with a discount approval that gives a reason the transaction never fulfilled.

Review After Onboarding Reaches the Payments

Continuing review tests how the relationship works after the first approval. The September 2024 compliance evaluation asks whether third-party risk management continues throughout the relationship and whether companies actually exercise audit rights. A right written into a contract has practical value when the company uses it to examine the transactions and resolve discrepancies.

Periodic review connects the original business rationale to later work, compensation and beneficiaries. A new payment route can matter even when the company’s instruction about the old route looks clear.

Fresenius Medical Care illustrates that problem. The Commission found that a directive prohibiting use of a Serbian agent was bypassed when an executive approved payments through a transport vendor, which then paid doctors. The vendor’s name on the payment supplied an extra layer between the company and the recipients. Reviewing only whether the prohibited agent remained on the payee list would miss that route.

Fresenius Medical Care: A Case Study on the FCPA, published in the Journal of Forensic and Investigative Accounting in 2022, describes an internal audit that flagged the Angola storage relationship, followed by continued payments. The Commission’s findings identify the underlying commercial contradiction: the company paid an official’s sons for warehousing they never provided, while it already leased storage elsewhere.

The audit warning and the missing storage service connect the approval file to what operations actually received. That is why the description in the accounts needs to be read alongside the work the company paid for.

When the Warning Reaches the Investigation

A warning’s path through the company can show why a payment practice continued. The important records include the original concern, the inquiry it triggered, the people assigned to it and the action that followed. Independence matters when the inquiry concerns the same business that controls the response.

Under its non-prosecution agreement, Walmart admitted that an anonymous email about India and follow-ups produced no investigation. In Mexico, recommendations from a preliminary inquiry went unfollowed, and further handling went to an implicated member of the subsidiary’s legal department. The reporting channel existed. The response stayed in the hands of someone implicated in the conduct.

RAE’s non-prosecution agreement supplies a related admission: an ordered internal audit produced no findings or recommendations. The instruction to audit and the audit’s result tell different stories about the company’s response. For an employee who raised the concern, what happened after that instruction is part of the payment story.

At AB InBev’s Indian operations, the Commission found that employees completed and backdated diligence forms after a promoter had begun work. They also altered the promoter’s answers to make them more suitable. An employee had raised concerns about the promoter’s lack of sales experience, staff and infrastructure. In another finding, an audit following a complaint about a different promoter did not scrutinize that promoter’s activities or expenses.

We see a review manufactured after the work had begun. The Commission found that employees backdated the forms to conceal the missing diligence and altered the answers. Paperwork to disguise the missing check. The dates and earlier answers tell a different story from the final approval page.

What an Insider Can See in the Records

The connection crosses departments. Purchasing holds the engagement, sales knows the customer, finance sees the payment and compliance holds the warning. An intermediary’s ownership, an invoice description and an internal objection become more useful when they can be connected to the same contract or official decision.

If you know the consultant’s staff never performed the work, or that a reseller kept the discount intended for the customer, that knowledge gives the paperwork context. We work with you to connect the decision, payment and false record, including what changed after someone questioned it. You may recognize the contradiction from your part of the business before anyone has assembled the whole transaction.

We assess which whistleblower program fits the conduct, including any separate fraud against the U.S. government. An FCPA tip to the SEC can earn 10% to 30% of sanctions over $1 million; where a government contract is involved, a False Claims Act case can pay 15% to 30% of what the government recovers.

When the Approval File Tells the Wrong Story

If you know who really performed the work, kept the discount or buried the warning, speak to one of our Whistleblower Experts about the transaction behind the file. We build your strongest foreign-bribery whistleblower case with you and bring in foreign-bribery whistleblower lawyers who understand intermediary payments and the records used to disguise them. We stay beside you as your inside knowledge becomes a case the right team can pursue.