Company Due Diligence in France
Company Due Diligence in FranceUpdated on Monday 18th April 2016
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Companies that operate in France as well as in the United States face tensions between the Foreign Corrupt Practices Act (FCPA) compliance and the European Union enforcement, fighting as well with the local privacy protection the country has.
The privacy laws in France, as well as their active enforcement, represent challenges for companies operating in both regions when conducting due diligence on business partners in France. It is known to be a difficult path to tread when conducting adequate background diligence on third parties, while respecting the strict law practiced by France in regards to data privacy.
Normally, third party due diligence implies collecting and documenting personal information of the potential third parties. However, France has increased the enforcement of laws that protects individuals’ right to data privacy.
No payments to the third parties
Companies and individuals are forbidden by FCPA to make payments to third parties knowing that all or a part of the payments will be transferred to foreign officials in order to obtain an advantage.
According to the Department of Justice (DOJ), due diligence in France includes verifying that a potential third party is qualified for the position or if a personal or professional relationship exists between the respective third party and a foreign government or a government official.
DOJ also draws attention on the “red flags” that are raised during the due diligence process. These flags may refer to the history of the third party, as well as the risk of corruption in the relevant foreign country. The red flags also may refer to unusual financial arrangements, payment patterns or high commissions, and in general it highlights the lack of transparency in records and accounting. France recommends as a best practice that companies must follow up on any red flag with investigation, whileproceeding with the business only if the red flag has a comfortable solution.
Besides FCPA, companies who operate in US as well as in France must respect the anti-bribery legislation set in France. This legislation does not allow corrupt payments made to public officials, directly or through third parties, as well as accepting corrupt payment by the public officials, directly or through third parties.
France incorporated terms set by several international anti-bribery organizations, such as Organization for Economic Cooperation and Development’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Anti-Bribery Convention). This organization suggests that companies should implement ethic programs that apply to third parties.
For more information about the due diligence procedures in France, you may contact our French lawyers.