Organizations doing international business should identify and address risks posed by anti-bribery and corruption laws in the U.S. and other countries.
The United States and other countries are cracking down on bribery and corrupt practices, and prosecuting companies and individuals under U.S. and international laws. Companies doing business in other countries should understand these laws and address the risks posed by domestic and international regulations.
Anti-corruption efforts in the United States
One of the most potent tools in the domestic battle against corruption is the Foreign Corrupt Practices Act (FCPA). Enacted in 1977 and amended in 1998, it is designed to combat global corruption involving U.S.-based entities and foreign entities doing business in the United States.
Prosecutions under the FCPA were rare a decade ago, but there has been a dramatic increase in the number of cases against corporations and individuals. The FCPA was spawned by federal investigations in the mid-1970s that lead to hundreds of U.S. companies admitting to making questionable or illegal payments to foreign government officials.
The Department of Justice (DOJ) is responsible for criminal and civil enforcement of the FCPA’s anti-bribery provisions. The Securities and Exchange Commission (SEC) is responsible for civil enforcement of the accounting provisions of the law among publicly traded companies and those required to make SEC reports. The DOJ and SEC act together to pursue individuals and companies for FCPA violations.
According to the 2012 Recent Trends and Patterns in FCPA Enforcement from Shearman & Sterling LLP, the DOJ and SEC imposed more than $30 million in fines and penalties in FCPA cases in 2005. In 2008, they imposed more than $800 million in fines and penalties. By 2010, the total rose to almost $1.8 billion. These fines and penalties are in addition to sanctions such as termination of government licenses and debarment from government contracting.
The highest fine imposed on a single corporation was in 2008, when Siemens was ordered to pay $800 million. In 2011, a $148.9 million fine was imposed on an individual. Excluding the highs and lows in recent years, the average penalty is between $3 million and $33 million, according to Shearman & Sterling LLP.
International anti-bribery efforts
The FCPA is no longer the only anti-bribery and corruption law that multinational companies must consider. In fact, worldwide intolerance of corruption has been on the rise for more than a decade. The Organization for Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Anti-Bribery Convention) is one well-known tool in the fight against international corruption. Thirty-eight countries, including four nonmember countries, are parties to the OECD Anti-Bribery Convention, and have adopted the 2009 Anti-Bribery Recommendations. Countries that have traditionally been inactive in enforcing anti-bribery and corruption laws have started taking a more active role.
Beginning in 2005, the United Nations Convention Against Corruption began requiring member nations to criminalize corrupt acts if laws do not already exist, and to offer model preventive policies to enhance transparency and accountability in government dealings. Organizations such as Transparency International and The World Bank are also active in promoting anti-bribery efforts.
Staying out of trouble
Organizations can take steps to identify and address risks arising from international anti-bribery and corruption laws:
- Top management should publicly address the value of FCPA and anti-bribery and corruption compliance, and outline expectations of all employees.
- Implement internal controls and procedures to support an effective compliance program.
- Perform regular risk assessments.
- Implement periodic and ongoing review of practices and procedures.
- Educate, train, and certify all employees and third parties.
- Conduct due diligence on all third parties, including agents, dealers, distributors, and joint venture partners.
- Conduct due diligence in mergers and acquisitions involving international entities.
- Implement frequent, effective two-way communication on anti-bribery and corruption issues.
- Create ongoing monitoring and auditing.
- Enforce and have disciplinary proceedings for violations of the anti-bribery and corruption compliance program.
- Implement an incident response program, including a hotline.
- Appoint a designated compliance officer.
How we can help
CliftonLarsonAllen’s forensic professionals can help you assess your risks related to bribery and corrupt practices laws in the United States and abroad. Based on this assessment, we can assist you in implementing best practices and procedures to help keep your organization from running afoul of the law.
Download our white paper, International Anti-Bribery and Corruption Compliance.
Download a resource guide to the FCPA.