Foreign Corrupt Practices Act

FCPA enforcement has gained a lot of momentum in recent years. It is a source of major problems for many companies that conduct business overseas. A good starting point for a company would be to review its current anti-corruption policies and consult on improvements to ensure that its program are compliant with current best practices.

Companies can have blind spots by not implementing protocols to monitor their international operations. This is generally induced by confidence that employees and business partners would behave ethically. Such an approach is not only risky but also costly. Spotting red flags early on can be cost-effective in two manners: a) the company can focus its human resources and scarce compliance budget on areas that matter the most, and b) curing problematic areas early on saves the client expensive defense costs down the road.

Having a dedicated in-house FCPA expert is not an option for all companies. However, consulting with outside counsel regarding compliance is a good alternative. If you are involved in international business it is advisable to implement an anti-corruption program that is articulated clearly so that management, employees and third parties can easily understand its core message.

Areas such as contracts with foreign governments are more likely to be sources of trouble. Entertainment, gifts, meals and travel are also major traps. Because company records are an easy source for the government to build its case, it is crucial to maintain accurate records and compliant processes. Business culture can be different in other countries and while some questionable business practices may not be “material”, the liability threshold under the FCPA is low.

Cases for inaccurate corporate records are the most common and the easiest to prove with penalties significantly higher than those for bribery. In addition to having an internal audit team trained to spot FCPA issues, it is also important to monitor third party business associates. They can be a major source of liability for companies. Due diligence is a minimum but it is not in and of itself a defense and other steps must be taken to monitor third parties.

The DOJ and SEC clearly emphasize their expectation of a “tone at the top.” In other words, senior management has to be sincerely and regularly promoting an anti-corruption culture that can be understood by employees and that can also be objectively measured. Companies need to put in place a discipline program that reprimands employees and business partners who don’t follow company protocol. This intransigence signals a strong anti-corruption culture and helps keep troubles at bay.

Additionally, language in employment contracts and contracts with business partners must include anti-corruption terms and conditions. These must stipulate audit and termination provisions, especially in international business contexts and can be specific to a business type and/or region. Failure to stipulate such clauses can be adversely misconstrued in case of an investigation.

Once in place, the anti-corruption compliance policy needs to be periodically reviewed to make sure it’s operating properly. A DOJ investigation simulation would be akin to a fire drill and would help identify weak links in the company’s policy.

Companies may be required to investigate FCPA violations abroad. It is worth noting that from a defense strategy point of view, a company that conducts its own investigations using its own employees and not outside counsel, will lack credibility before the US government.

KB Strategies can assist in one or more aspects of an FCPA compliance policy especially in Africa and the Middle East. In case of investigations, KB Strategies can investigate or coordinate with in-house or external teams to determine scope and strategy, or alternatively can focus on a specific portion of the process or geographic area. This can be an excellent choice in instances where deploying a large legal team overseas would not be an economically viable choice.