Global Anti-Bribery Compliance: Commission Rates

In terms of global anti-bribery compliance, many mistakenly believe that if an agent is paid a commission rate within industry norms, what concerns that may exist are largely alleviated as to there being a potential for a violation of the FCPA, UK Bribery Act, Canada’s Corrupt of Foreign Public Officials Act, Division 70 of Australia’s Criminal Code, Brazil’s Clean Companies Act, or any other anti-bribery legislation now being enforced. In the absence of adequate due diligence and relevant “red flags,” exclusive reliance on an industry norm or standard commission rate as some sort of “safe harbor” is misplaced. The larger context must always be kept in mind.

The key to any analysis is gaining an understanding of what may be really taking place. If the agent has no experience in the industry, how does one know that he or she is not simply acting as a conduit for facilitating an improper payment? What if the due diligence suggests that the character of the agent is highly questionable? Even if the industry norm in terms of a commission rate serve as the basis for the commission, red flags posing a serious problem still exist.

If the due diligence suggests that the agent is not disqualified on the basis of his or her character, the industry norm in determining the amount of a commission is unlikely to suffice. If the agent has some sort of ties to the government, or a government-owned or controlled entity, such as his or her status as a government official or indirectly through family members, then reliance on industry standards does not necessarily overcome concerns generated by potential ties to the government.

When or how the commission is paid may also be a factor? Making a commission payment conditional upon government approval of a contract or a procurement may raise concerns as to whether anything has been offered or promised. In short, whether the payment of a commission is in line with industry standards is just one of many factors in making a determination as to whether an improper may have been offered, promised, or paid.  The larger context must always be kept in mind.

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