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There were only three FCPA enforcement actions in the first quarter of 2019, but the small number obscures a bigger threat to corporate bottom lines—fines totalling $1.1 billion. This figure eclipses the total settlements in Q1 2018—also for three corporate enforcement actions—of a mere $3.45 million. What does this mean to risk management professionals? It’s more important than ever to ensure that your processes for managing third-party risk meet regulators’ standards.
FCPA compliance failure leads to $850 million penalty
At the top of the pack—and not in a good way—is Russia’s biggest mobile phone company, Mobile TeleSystems Public Joint Stock Company (MTS). The FCPA Enforcement Report noted that the company paid $100 million to the SEC for violating the anti-bribery, books and records, and internal accounting controls requirements of the FCPA. MTS also faced criminal penalties levied by the DOJ of $850 million, with credit for the $100 million paid to the SEC. Both MTS and its Uzbek subsidiary are now required to engage a compliance monitor for three years as part of the deferred prosecution agreement.
Compared to the hefty fines levied on MTS, the other two companies received relatively modest penalties.
But these weren’t the only actions taken in Q1 for FCPA compliance failures.
Individuals face significant penalties for ignoring bribery risk
The Report also highlighted several investigations, guilty pleas and sentencings against individual actors in FCPA violations
In addition, individuals related to two of the corporate enforcement actions face charges. The former president and the former chief legal officer of Cognizant were each charged in a 12-count indictment ranging from conspiracy to violate the FCPA to falsifying books and records to cover up the crimes. Likewise, the former CEO of an MTS subsidiary, along with the daughter of the former president of Uzbekistan, were charged with a variety of bribery and money laundering offenses.
The message is clear: If leadership doesn’t set—and adhere—to high standards of FCPA compliance, they’ll be held accountable. Make sure you implement a rigorous bribery and corruption risk mitigation process or face the consequences. Are you confident enough to put corporate finances and personal freedom on the line?
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