In the days following President-elect Donald Trump’s announcement of his intention to nominate Sullivan & Cromwell partner Jay Clayton as Chair of the Securities and Exchange Commission, countless observers have opined on how the SEC’s priorities may change in the upcoming administration.
One area of speculation involves the SEC’s role in FCPA enforcement, which, in recent years, has become a top priority for the agency. Can companies subject to the FCPA now let down their guard and perhaps not worry so much about compliance?
Not likely.
In suggesting that the SEC’s hard-charging days may be behind it, commentators have pointed to a December 2011 paper issued by the NYC Bar Association’s Committee on International Business Transactions, Chaired by Clayton, entitled, “The FCPA and its Impact on International Business Transactions—Should Anything be Done to Minimize the Consequences of the U.S.’s Unique Position on Combating Offshore Corruption?”
The paper criticized the U.S.’s increased enforcement of the FCPA over the prior decade, contending that such enforcement deters companies from engaging in merger and acquisition activity, lest they acquire liability or come under the FCPA’s jurisdiction. The position Clayton’s committee took in this paper, paired with Clayton’s work at Sullivan & Cromwell, could cause some — critics and supporters alike — to assume that the SEC will scale back its FCPA enforcement efforts. This assumption is unlikely to pan out.
First, the SEC’s (as well as the Department of Justice’s) application of the FCPA has showed no sign of slowing down in the five years since the paper’s release. In fact, 2016 proved to be a record-breaking year in terms of both number of companies resolving FCPA actions and the amounts they paid, with 27 companies paying out nearly $2.5 billion. Things in Washington do not change that quickly, and after many years of vigorous FCPA enforcement, it seems highly unlikely that we will see a sudden change in course.
Second, the paper’s focus on the U.S.’s “unilateral” approach to preventing corruption is outdated. At the time of the paper’s release, the UK Bribery Act had been in force for just a few months. Since that time, the UK has enforced the law against several violators and many more are under investigation. And other countries — including China, India, and Brazil — have introduced, enacted, or amended anti-bribery and anti-corruption laws of their own, laws that in many ways are more expansive than their U.S. counterpart. It would be a mistake, moreover, to think of these laws as mere lip service, as evidenced by, among other examples, GSK’s bribery conviction in China and Brazil’s ongoing Lava Jato scandal.
In addition, an argument can be made that vigorous enforcement of the FCPA is a matter of national security. To be sure, the FCPA has its roots in leveling the playing field — i.e., taking away the competitive advantage from companies that bribe foreign officials. While this remains a key motivating factor behind FCPA enforcement, recent U.S. anti-corruption efforts are in part meant to change corrupt behavior within foreign governments, and are therefore intended to strengthen national security, as I noted in my 2015 article discussing the Obama Administration’s use of the FCPA as a foreign policy tool.
The White House’s September 2014 U.S. Global Anticorruption Agenda noted that “[p]ervasive corruption siphons revenue away from the public budget and undermines the rule of law and the confidence of citizens in their governments, facilitates human rights abuses and organized crime, empowers authoritarian rulers, and can threaten the stability of entire regions.” President-elect Trump has vowed to make national security a top priority; the FCPA is one tool that he can use to deliver on this promise.
Finally, the suggestion that the 2011 paper’s position serves to forecast Jay Clayton’s actions as SEC chair ignores the countless individuals who zealously represent their private-sector clients and, at different points in their careers, effectively advocate on behalf of the American public. For a prime example we need look no further than the current SEC chair, Mary Jo White, who, before she spearheaded aggressive enforcement measures at the SEC, was no less zealous in taking on the Commission and DOJ on behalf of corporate clients.
Another example worth mentioning is Andrew Weissmann, the current Chief of the DOJ’s Fraud Section who, in his prior life in the private sector, co-authored a piece that recommended limiting the scope of the FCPA. Yet, under Weissmann’s stewardship, the DOJ has exacted its most significant FCPA penalties.
Companies would be wise to continue maintaining their anti-bribery and corruption programs. For those within the FCPA’s jurisdiction, aggressive enforcement of the law is likely to continue. But even allowing for the unreliability of policy predictions based, like this one, on little data, multinationals in particular would do well to remember that even a shift in the SEC’s enforcement priorities might not be such good news: considering the increasing lawmaking and enforcement activity abroad, companies that do not maintain robust anti-bribery and anti-corruption programs are likely to run afoul of other countries’ laws.
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Daniel R. Alonso is a managing director with Exiger, the global regulatory, financial crime, risk and compliance firm. A former federal and state corruption prosecutor, he is also the chair of the Integrity Forum, an ongoing series of breakfast events which address a wide range of integrity-themed projects.
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