Complying with the United State Foreign Corrupt Practices Act

Complying with the United State Foreign Corrupt Practices Act

 
Enforcement of the United State Foreign Corrupt Practices Act ("FCPA") has reached record highs in recent years. With this increase in FCPA enforcement attention, companies act at their peril when they do business internationally without a well-developed anti-bribery compliance program. Smaller companies with modest but expanding international footprints and thin compliance infrastructures are particularly at risk.
 
The authors write: Enforcement of the United State Foreign Corrupt Practices Act, a law that prohibits corrupt payments of anything of value to non-U.S. government officials to obtain or retain business or any improper advantage has reached record highs in recent years. From 2006 through 2008, the U.S. Department of Justice ("DOJ") and the U.S. Securities and Exchange Commission ("SEC"), which jointly enforce the law, initiated ninety criminal and civil enforcement actions, which exceeded the total number of FCPA enforcement actions brought by the DOJ and SEC in the first 25 years after the statute's passage in 1977. Through September 2009, the government had brought nearly 30 FCPA cases and, as of November 17, DOJ officials said that there were approximately 130 FCPA investigations in the enforcement pipeline, up from 100 at the end of last year. The SEC recently announced that it is creating a specialized unit of experts within its Enforcement Division to investigate FCPA violations, one of only five specialized units under the Commission's new reorganization plan.

With this increase in FCPA enforcement attention, companies act at their peril when they do business internationally without a well-developed anti-bribery compliance program. While many FCPA cases have been brought against large, publicly traded companies, the statute's reach is broad, sweeping in any company that is incorporated or has its principal place of business in the United States, as well as individuals who are U.S. nationals or residents or employees or agents of U.S. businesses. Smaller companies with modest but expanding international footprints and thin compliance infrastructures are particularly at risk if they do business in emerging economies where official corruption is prevalent. These risks do not relate solely to sales and marketing activities; they frequently arise in connection with offshore sourcing, manufacturing, regulatory (e.g., customs) and other governmental contacts. In addition, enforcement authorities have increasingly turned their focus on individuals. In 2007 and 2008, the DOJ and SEC brought cases against more than 30 individuals, substantially more than in prior years. That trend has continued in 2009. The government has obtained convictions in three FCPA trials against individuals since July of this year.

In this climate, U.S. enforcement authorities will expect any U.S. company or person who does business abroad to have considered FCPA risks and to have taken steps to mitigate that risk through effective compliance controls. Attention to the essential components of an FCPA compliance program discussed below will go a long way toward managing the risks of corruption in international business transactions. [footnotes omitted]
 
 
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