What Every Private Equity Professional Should Know About the Expanded Scope of Global Anticorruption Enforcement

Abstract

The increasing global appetite for anticorruption enforcement, combined with ever-lower thresholds for liability, signifies new frontiers of potential exposure. With private equity firms invested in high-risk industries around the world, often in countries with different business customs and practices, the upstream risk of inadvertently incurring civil as well as criminal liability from the actions of portfolio companies abroad can be substantial. To add to this threat, as private equity firms increasingly seek to create value in portfolio companies through active ownership rather than through governance and financial engineering, firm personnel who serve as officers or directors of portfolio companies may increasingly face personal liability—even if they did not authorize, participate in, or, under certain circumstances, even know about improper actions occurring at the portfolio company level. Private equity’s increasing prominence in the media and financial markets, against the backdrop of a global political and enforcement environment primed to cast financial firms as bad actors, makes a clear understanding of emerging risks essential to developing appropriate strategies to address compliance with pertinent anticorruption laws.

TOPICS: Private equity, risk management, legal/regulatory/public policy, global