Foreign Corrupt Practices Act Enforcement on the Rise
- United States
- 08/24/2009
The Foreign Corrupt Practices Act (“FCPA”) has become increasingly important as virtually every company conducts at least some aspect of business overseas. The FCPA criminalizes bribery of foreign officials by U.S. corporations and individuals pursuing business in foreign countries. The FCPA also includes accounting regulations designed to prevent cash transactions or “off the books” payments from being made to foreign governments.
Penalties for violating the anti-bribery provisions of the FCPA are substantial – individuals face criminal fines of up to $250,000, five years in prison, or both, while corporations face criminal penalties of up to $2 million per violation. Likewise, individuals who criminally violate the books and records and internal controls provisions face up to twenty years in prison, a $5 million penalty, or both, and corporations face up to a $25 million fine per violation. In addition, civil penalties may be imposed for both types of violations.
The government has responded to the globalization of business by increasing its FCPA enforcement activity. In 2008, the U.S. Department of Justice and Securities and Exchange Commission (“SEC”) initiated a record-number of foreign corruption investigations. In fact, last year the DOJ and SEC collected more than $924 million in combined penalties from corporations and individuals for FCPA violations. The overall trend of increased enforcement activity has continued during the first half of 2009, and there is no indication that this trend will soon subside. Just as the government is increasing enforcement efforts, businesses need to take compliance to the next level as well.
Businesses that lack an anti-corruption compliance program face great legal, financial, and reputational risks. The first step to avoiding a violation and liability is establishing an effective compliance program that not only exists on paper but is actually put into practice. At a minimum, a company should consider the following: establishing standards and procedures to prevent, detect, and respond to criminal conduct; conducting compliance training; creating record-keeping systems to properly account for all overseas transactions; developing a reporting system whereby individuals can report criminal conduct; and conducting periodic reviews and audits of the company’s compliance systems to ensure that they are functioning properly
