One of the more prevalent topics for corporates and investment banks has been compliance with the U.S. Foreign Corrupt Practices Act of 1977, as amended (FCPA) which generally prohibits U.S. companies from bribing foreign officials for government contracts and other business. While the U.S. Department of Justice (DOJ) typically has primary enforcement and oversight of FCPA matters, companies and practitioners may not be aware that the U.S. Securities and Exchange Commission (SEC) in 2010 created a specialized FCPA Unit under the Enforcement Division. The SEC’s FCPA Unit focuses on monitoring FCPA matters and investigating FCPA violations that arise with SEC registrants.
Earlier this year, the FCPA Unit discussed certain enforcement topics that remain relevant for SEC registrants. We believe these issues will remain salient for SEC registrants as we enter 2015, and include:
- Internal compliance and self-reporting measures – internal compliance measures must be thoroughly reviewed against current risks and developments in a registrant’s business, which can be used to support self-reporting measures and voluntary disclosure. A company’s internal compliance program should be implemented on a company-wide basis, with training given to employees who deal with government contracts or work in high-risk jurisdictions. A company may also decide to engage legal, compliance or risk mitigation personnel for these trainings, or retain the services of such parties to conduct internal due diligence on existing contracts or business operations, or perform an audit on third party service providers that the company retains to interact with government entities.
Once an internal compliance program is in place, often times companies may uncover matters that could constitute violations. Companies may consider affirmatively and pre-emptively providing reports on disclosure and compliance issues to the relevant US officials, which typically include the SEC, DOJ and other authorities. The SEC has stressed that self-reporting and voluntary disclosure should be done proactively and before significant issues are able to take root and spread through a company. Voluntary early disclosure has been noted as helpful to enable the SEC to assist registrants to identify and resolve major issues, and should be carefully considered by a company.
- Cooperation with other countries – the FCPA unit has noted that while the SEC and DOJ will continue to respect the sovereignty of foreign governments and the relevant anti-bribery and anti-corruption laws of that country, there has been an effort by the SEC, DOJ and certain foreign governments to work together to facilitate investigations of corruption and bribery matters, which seem to be a natural extension of things given the often global nature of such investigations.
- Whistleblower programs – instituted by the Dodd-Frank Act, this program provides payouts of up to 10% to 30% of the amount of penalties collected to tipsters that assist with successful SEC enforcement actions of US$1 million or more. The SEC recently announced the largest ever whistleblower award of US$30 million to a foreign tipster. While the identity and information of this particular incident was not disclosed by the SEC, the FCPA Unit has remarked that whistleblower programs are helpful and will be at their full disposal when investigating registrants and certain industries.
As we settle into the new year and registrants enter a new reporting calendar, it is absolutely critical that international companies in certain industries or operating in certain countries consider the impact of the FCPA on their operations and attendant risks, and put into place the necessary compliance measures to deal with such risks.