QuickCounselGlobal Anti-Corruption EnforcementBy Morrison & Foerster's FCPA + Anti-Corruption Task Force  OverviewFCPA Basics The UK Bribery Act The OECD Convention Compliance Programs Conclusion Additional Resources Rate this QuickCounselOverviewIn the midst of a global anti-corruption crackdown and increasing multinational enforcement, companies cannot afford to ignore global anti-corruption laws. A patchwork of international laws imposes substantial and varied compliance burdens and threatens steep penalties. This QuickCounsel provides a summary of the key provisions of the U.S. Foreign Corrupt Practices Act (“FCPA”), the Organization for Economic Cooperation and Development’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (“OECD Convention”), and the UK Bribery Act 2010 and the UK Ministry of Justice’s guidance on the Act. We conclude with steps companies can take to minimize their risk of running afoul of anti-corruption laws. FCPA BasicsThe FCPA contains two primary provisions:
Exceptions and DefensesThe FCPA provides one main exception and two affirmative defenses to its anti-bribery provisions. First, so-called “facilitating payments” made to expedite or secure routine government action are permitted. For example, payments to expedite visa applications or obtain mail, police protection, and utility services may be permissible. Second, a person charged with an FCPA violation may offer a defense that his otherwise prohibited activity was legal under local written law. Third, the FCPA provides a narrow defense for bona fide expenditures related to the promotion or demonstration of goods or services or to the execution or performance of a contract with a government or government agency. Companies should be aware, however, that other domestic and foreign laws may apply to conduct that the FCPA exempts. These include the mail and wire fraud statutes and the Travel Act, which makes it a federal crime for anyone to use foreign or interstate commerce for the purpose of carrying out certain unlawful activities. FCPA EnforcementThe consequences of an FCPA violation can be dramatic. In addition to being forced to disgorge profits, companies may be fined up to $2 million per violation of the anti-bribery provisions and $25 million per violation of the accounting provisions. The Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”) are responsible for FCPA enforcement. They have made enforcement of the FCPA a high priority. Compared to just two criminal prosecutions (and $11 million in fines) in 2004, the DOJ brought 48 criminal cases in 2010, while the SEC filed 26 new actions in 2010. Companies paid a record $1.8 billion in financial penalties to the DOJ and SEC for FCPA violations. Both the DOJ and SEC have dedicated substantial resources to detecting and prosecuting FCPA actions. International cooperation and the whistleblower provisions of the Dodd-Frank Act provide the government with additional sources of information that will likely lead to even more FCPA enforcement. Even once a government investigation is over, the consequences are not. FCPA settlements frequently involve continued oversight by an independent monitor (at the company’s expense), long after the settlement is finalized. Follow-on civil suits by shareholders and competitors are also common. And U.S. and foreign governments may suspend the company’s export licenses and/or debar it from receiving government contracts. The UK Bribery ActThe Bribery Act 2010 (the “Act”) comes into force on July 1, 2011. The Act has extra-territorial implications and will apply to commercial organizations doing business in the UK, regardless of where those commercial organizations are domiciled and whether or not the relevant acts took place in the UK or are in any way connected with the organization’s UK operations. There are four offences under the Act:
Having “adequate procedures” in place aimed at the prevention of bribery is a defense to an allegation of failure to prevent bribery. The UK Ministry of Justice has released guidance (the “Guidance”) as to what may constitute “adequate procedures.” The core principle of the Guidance is “proportionality” and it recognizes that different commercial organizations will face different bribery risks. The Guidance focuses on six core principles which should be considered by commercial organizations when drafting their anti-bribery policies and procedures:
The Guidance is not intended to be prescriptive, however, and will be assessed by the courts on a case-by-case basis. Key Differences Between the UK Bribery Act and the FCPAU.S. companies affected by the Act should review and, if necessary, revise current anti-corruption programs, policies, systems, and training programs to ensure they comply with the Act prior to its implementation. Key differences between the FCPA and the UK Bribery act include the following: The OECD ConventionThe OECD Convention requires its 38 member countries to criminalize bribery of foreign officials. Like the FCPA, the OECD Convention contains both anti-bribery and accounting provisions. It requires parties to criminalize the intentional offer of “any undue advantage,” directly or through intermediaries, to a foreign public official, to obtain or retain business or other improper advantage in the conduct of international business. “Any undue advantage” is defined broadly, but the OECD Convention, like the FCPA, does permit facilitation payments. Anti-bribery enforcement by OECD member countries is increasing, and not just in the U.S. and the U.K. From 1999 to 2009, OECD Parties criminally sanctioned 148 individuals and 77 legal entities for foreign bribery, with at least 40 of those individuals sentenced to prison for their convictions. Key Differences Between the OECD Convention and the FCPAThe OECD Convention differs from the FCPA in a few key areas. First, like the UK Bribery Act, the OECD Convention does not provide a defense for reasonable and bona fide expenditures related to the promotion of a company’s products or services. Second, although the OECD Convention currently permits facilitation payments, the OECD has urged its member countries to combat them. Finally, the OECD’s definition of “foreign public official” is narrower than the FCPA’s—the OECD does not cover payments made to political parties and party officials. Because the OECD Convention sets the floor, rather than the ceiling, for parties’ anti-bribery laws, countries are free to impose stricter requirements. It is important for companies to be aware of the specific laws of the countries in which they are doing business to ensure compliance with potentially more stringent requirements. Compliance ProgramsA strong compliance program can go a long way in fulfilling a company’s anti-corruption obligations, and potentially reduce penalties if the company discovers violations. Tone at the TopA strong, compliance-focused tone at the top is a critical component of any compliance program. Company executives should regularly communicate the need for full compliance and make clear that violations are not tolerated. Training programs are an excellent opportunity to communicate these messages. A company’s executives should publicly encourage anti-corruption training and compliance and make certain that employees know the processes available to them to escalate potential issues. The AudiencePrior to establishing a compliance training program, a company-wide assessment should be conducted to identify business units, regions, and job positions that are most likely to be exposed to corruption. What to CoverWhile training programs should be customized to a company’s specific risk factors, effective anti-corruption training programs frequently include the following: an accessible overview of the law, training on “red flags” (transactions, actions, or behaviors that may indicate violations), a review of the company’s anti-bribery policies, any “gray areas” under the laws and customs in the foreign territories in which the company does business, and the company’s disciplinary and anti-retaliation procedures. It is often useful to use a training program to educate employees about reporting procedures and to actively encourage employees and agents to report or seek guidance when confronted with potential or actual violations of anti-corruption laws. This message is particularly important in light of the Dodd-Frank Act, which provides incentives and protections for whistleblowers. FrequencyAnti-corruption policies are only as robust as the controls that enforce their compliance. Policies and procedures must be followed, monitored, and updated regularly. That includes keeping tabs on the conduct of consultants, business partners, and other agents that the company and its subsidiaries employ in foreign countries, as well as company employees. ConclusionGlobal anti-corruption laws impose substantial and varied obligations on any company conducting cross-border business. Steps companies can take to fulfill their anti-corruption obligations include bringing a clear focus to these issues; communicating a strong tone at the top; educating employees and agents about how to seek guidance when confronted with potential anti-corruption issues; and establishing a strong, up-to-date compliance program tailored to the company’s specific risk areas. Additional ResourcesACC Resources
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Reprinted with permission from the Association of Corporate Counsel 2012 All Rights Reserved Average rating:
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