Anti-corruption laws, and the enforcement of those laws, have been the focus of intense scrutiny in recent years in the U.S. and abroad, and for good reason. Fraud and corruption in the corporate setting can result in significant financial losses for those businesses that are directly affected. On a broader level, corruption also undermines and erodes public and investor confidence.
Corporations must comply with all applicable laws and regulations, including both industry-specific rules and anti-corruption laws such as the Foreign Corrupt Practices Act (FCPA) and, in some cases, the UK Bribery Act. For corporate risk management and compliance professionals, the challenge lies in creating and monitoring controls that are reasonably designed to mitigate risk and meet all regulatory requirements while ideally having a negligible impact on business operations.
FCPA Requirements and Reach
Originally passed by Congress and signed into law in 1977, the FCPA addresses the risks inherent when a publicly-traded U.S. company (or someone working on behalf of the company) bribes a foreign official in order to do business in another country. Such payments are prohibited under the law, regardless of whether they are made by an officer, director, employee, stockholder, or an agent. These anti-bribery provisions apply to everyone in the U.S., as well as certain foreign firms, persons, and issuers of securities. The FCPA’s provisions for companies whose securities are listed in the U.S. also include accounting and record-keeping requirements.
Businesses that run afoul of the FCPA can find themselves in the cross-hairs of the Securities and Exchange Commission (SEC), facing civil enforcement and penalties including disgorgement of ill-gotten gains. Enforcement is not limited to business entities. Issuers of securities, officers, directors, employees, stockholders, and agents (including third-party agents, distributors, consultants, and more) may face significant consequences if violations of the law are ultimately shown to have occurred.
Practical Guidance and Best Practices for Corporate Legal and Compliance Departments
The SEC and the U.S. Department of Justice (DOJ) share oversight and enforcement responsibility for FCPA violations, although the Commodity Futures Trading Commission (CFTC) has also gotten involved in FCPA enforcement actions. This multi-agency approach can foster confusion. In an attempt to create greater transparency, the DOJ released updated guidance on April 30, 2019, providing new insights for federal prosecutors charged with determining the adequacy (or inadequacy) of corporations’ compliance departments after FCPA violations come to light.
The guidance document, titled “Evaluation of Corporate Compliance Departments,” can also serve as a preventive tool for corporate legal and compliance departments as they conduct internal reviews of their compliance efforts. While originally designed to assist prosecutors, the DOJ also recognized that the document could be used by corporations in a proactive manner. Laying out the factors prosecutors should evaluate when determining whether to bring charges against a company, the DOJ’s document also introduces questions that compliance and legal teams can use to evaluate the effectiveness of their organizations’ compliance programs. Because a corporate compliance program must be evaluated in the specific context of a criminal investigation, there is no set formula to assess the effectiveness of corporate compliance programs, and verdicts are made on a case-by-case basis. There are, however, common questions that the DOJ will ask in the course of making a determination:
- Is the corporation’s compliance program well designed?
- Is the program being applied earnestly and in good faith? In other words, is the program being implemented effectively?
- Does the corporation’s compliance program work in practice?
Companies can access the DOJ’s FCPA Guide online for more information. Organizations whose internal investigations reveal potential violations of the FCPA are charged with self-reporting such violations to the FTC by email at FCPA.Fraud@usdoj.gov.
Examples of Anti-Corruption Efforts and Programs
Recognizing the potential reputational harm that FCPA violations or other instances of fraud or corruption can bring, a growing number of U.S. companies are acting proactively to shore up their compliance programs and avoid problems.
Many well-known companies including Coca-Cola, Lockheed Martin, Microsoft, and Exxon Mobil have made their anti-corruption efforts front and center, sharing details about company philosophy and risk mitigation efforts. These organizations and many others have publicized their stances against corrupt practices, making it clear to customers, employees, and investors alike that anti-corruption compliance is something the organization takes seriously.
As enforcement of the FCPA and other anti-corruption legislation grows, so too does the need for proactive compliance monitoring programs that detect potential problems before they arise. Utilizing Relativity Trace, we can immediately flag the highest risk content to your compliance officers for further review. Read more about Special Counsel’s real-time communication monitoring solutions and start protecting the high ethical standards of your company today.
Michael Manzo, Director Of Business Development, and Michael Manfredi, Regional Vice President of Business Development, develop customized solutions for Special Counsel clients and have a demonstrated history of working in the information technology and services industry.
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