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Compliance clauses can keep third parties in line, regulators at bay

Joe Mont | September 13, 2016

No company is an island unto itself. Vendors, distributors, suppliers, sales agents, and other third parties are all part of an extended “family” that will expand its risk profile.

Regulators, in the United States and abroad, are increasingly holding companies responsible for their partners’ problems, with the sins of sub-contractors visited upon the prime. Domestically, the government’s growing focus on money laundering, corruption, bribery, and violations of the False Claims Act enhance the risk of mammoth fines, lost contracts, and personal liability.

A baseline strategy for minimizing third-party risks is the use of compliance and ethics clauses in the contracts that establish ground rules for a business relationship. Drafting effective clauses, and ensuring that everyone adheres to them, was the focus of a recent panel discussion during the annual meeting of the American Bar Association’s Business Law Section in Boston.

The process is not as simple as...

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