Cross-Border Due Diligence: Navigating an Insecure World

Welcome to the March 2018 edition of our newsletter!  In this issue, we’ll examine the growth of multinational transactions, the risks posed by them and how to protect yourself while seizing opportunities.

A Balancing Act: Doing Business Overseas While Complying with U.S. Laws

Tariffs.  Sanctions.  Regulations concerning solicitation of foreign officials.  As commerce becomes ever more global in scope, both new risks and old arise to potentially confound business opportunities.  For U.S.-based clients, while each country has its own set of customs, values and laws, adhering to U.S. anti-bribery and honest services laws when conducting business overseas is critical.  The Foreign Corrupt Practices Act, now 40 years old, remains a key standard in conduct of business with foreign officials, and makes knowing your potential on the ground business partner, or consultants and the like, all the more essential.  Can they be trusted to handle sensitive information confidentially?  What is their reputation in the business community?  Are they close – perhaps too close – to government officials?  Is there a chance they could break U.S. laws, if not their own, while representing you by promising something in return for favorable treatment?

Knowing Your Partner: a Guide to Researching Foreign Businesspersons

Knowing the reputation of customs officials, defense ministers, or other relevant government parties can be an important step in deciding whether to do business overseas, but if using a broker, or partnering with a local businessman, knowing their history is even more essential.  A thorough public records check (including their local media to the extent possible) is an important first step before any deals are struck.  If they have a history of being sued in their country – or in U.S. federal courts which can be used to litigate cross-border transactions – that must be taken into account, as well as negative media citations and any administrative sanctions.  Bearing in mind that in some countries the state acts as a politically motivated tool of its leader, not as an objective enforcer of laws, a party’s reputation and history – to the extent discerned from public records – is an important part of any decision-making process.  If red flags arise, a potentially sound second step would be to interview former employees or colleagues of the subject party, to better understand if any other context exists that may not have been fleshed out in litigation or news reports.

A wealth of information exists about parties doing business in a variety of industries across the globe.  While the challenges may be many, so too are the resources, and with the right preparation you can seize business opportunities while minimizing the risks of potentially dealing with an unscrupulous actor.