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Julie DiMauro
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Thomas Fox
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The compliance lessons we learned in 2013

The theme of this year’s FCPA reporting, detection and enforcement activity is that the bribery of foreign officials is not something the public will tolerate or the U.S. government will trivialize.

It is also something businesses can and must create mechanisms to prevent.

The SEC and DOJ produced a 120-page joint guidance to assist companies of all sizes meet their obligations with regard to the law, from its books and records provisions to unlawful payments to foreign government officials. In the broader world of regulatory compliance it is significant to note that the largest whistleblower award since the SEC’s Office of the Whistleblower was created in 2011 was granted — $14 million. The guidance and the whistleblower program are designed to help companies comply with the law, and to understand the ramifications of not enabling their employees to report instances of illegal conduct.

The compliance departments of companies are front and center in the corporate effort to abide by the rules, and the support they receive in their businesses is integral.

‘The overall culture of compliance is what is most important to the regulators,’ said Jeremy Zucker, a partner at the law firm Dechert LLP in New York. ‘They are looking at whether senior management is committed to the program, whether compliance personnel are appropriately empowered, and if systems are in place to deter and detect non-compliance.’

Although non-prosecution agreements (NPA) are criticized by some for being overused, they can serve as vindication to compliance professionals. The companies granted an NPA are awarded for doing exactly what effective compliance departments are known for  — namely, taking an immediate approach to improving and updatingb compliance programs, disclosing evidence uncovered and cooperating actively with an investigation. Ralph Lauren Corporation avoided FCPA charges in April because of its prompt reporting of the violations to the U.S. government and the completeness of the information it disclosed.

‘The significant monetary savings reflected in the avoidance of fines should provide renewed ammunition to compliance officers looking to justify and/or expand their budgets,’ Zucker notes.

This year also featured two of the largest FCPA penalties ever assessed against a company. Total S.A. and Weatherford International Ltd. were penalized for making illegal payments to officials in the Middle East and Africa to gain lucrative contracts.

Companies are on notice that the risks they face in conducting business overseas must be thoroughly understood. ‘Correctly assessing the FCPA risk of a business means appreciating where the company does business, with whom they are doing their transacting and how it is conducting its business,” notes Venkat Eswaran, senior vice president of Nair & Co. ‘The compliance program should be written in accordance with the risk assessment tailored to the needs of the company,’ he advises.

Lee Dunst, a partner at the law firm Gibson Dunn & Crutcher LLP in New York, agrees, noting that compliance policies should be tailored to the type of business transactions a company engages and where they are conducted. ‘When it comes to anti-corruption, “one size does not fit all,” and programs must be evaluated based on the real risk facing a company depending on the nature of its business and the locations where it operates globally,’ he says.

Eswaran and Dunst emphasize that it’s often the conduct of third-party vendors that can land a company in hot water. ‘Having a strict clause in vendor contracts for compliance with the FCPA is absolutely necessary,’ Eswaran says. ‘This law should be covered in every international contract.’

Dunst says companies should ensure their FCPA compliance program adequately measures the actual risk involved. ‘A substantial payment to a third-party agent playing a central role in the acquisition of a high-value contract should be subject to a greater compliance and investigative response than, for example, an occasional payment of a nominal amount to an immigration official,’ Dunst adds.

Eswaran says he often advises firms to avoid making any facilitating payments to foreign officials, even though the FCPA permits them. ‘That payment could be illegal in the country where the payment is being made,’ he notes.

Indeed, other countries are getting more involved in the enforcement of anti-bribery enforcement. The UK has committed to an active approach to enforcement, taking the initiative to penalize a company before bribery takes place so as to call out those with weak controls that could fail to detect and prevent bribery.

‘The Chinese are bringing enforcement actions against Western companies, the Brazilians have a new anti-corruption law; and the Russians enhanced theirs,’ says Zucker. ‘Compliance and enforcement are going global more than ever.’

When Total S.A. was charged with FCPA crimes in the United States this spring, Mythili Raman at the DOJ, who is heading up the unit’s criminal division, noted that the action was the first one in the foreign bribery area to involve a closely coordinated action between French and U.S. law enforcement.

All of this global enforcement means that companies in a global economic environment must understand what constitutes bribery in each jurisdiction in which they operate.

‘FCPA and anti-corruption training by outside experts can be helpful,’ says Manoj “Tito” Pombra, Chief Compliance Officer of Matthews International Capital Management LLC. ‘After the training, given at least annually, ongoing reminders are important, about how to spot areas of risk and who is considered a foreign official. And disclosures should be made regarding the nature of the company’s relationship with foreign governments and representatives.’

When compliance departments are given the resources and support they require, the best practices described above can be implemented, and the performance of companies can be viewed as the outcome of superior services and products — and not the result of bribery or corruption.


Julie DiMauro is the executive editor of the FCPA Blog and can be reached here.

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