November 24, 2020

Volume X, Number 329

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10 Reasons Why FCPA Compliance Is Critically Important for Businesses

  • The Foreign Corrupt Practices Act (“FCPA”) prohibits companies from bribing foreign officials in an effort to obtain or retain business, and it requires that companies maintain adequate books, records, and internal controls to prevent unlawful payments.

  • The FCPA was passed in response to an increase in global corruption costs.

  • Implementing an effective FCPA compliance program can benefit companies financially and socially, and it can help companies seize opportunities for business expansion.

  • In drafted and implemented appropriately, an FCPA compliance program will: serve as an invaluable tool against corruption, promote ethical conduct within the company, reduce the societal costs of corruption, and foster business expansion domestically and globally.

  • Company leaders should consider hiring experienced legal counsel to provide advice and representation regarding FCPA compliance.

What is the Foreign Corrupt Practices Act?

Enacted in 1977, the Foreign Corrupt Practices Act (“FCPA”) is a federal law that prohibits bribery of foreign officials in an effort to obtain or retain business. It also requires companies to maintain adequate books, records, and internal controls in their accounting practices to prevent and detect unlawful transactions.

Congress passed the FCPA in response to growing concerns about corruption in the global economy. The FCPA includes provisions for both civil and criminal enforcement; and, over the past several decades, FCPA enforcement proceedings have resulted in billions of dollars in penalties, disgorgement orders, and other sanctions issued against companies accused of engaging in corrupt transactions with government entities.

What are the Risks of FCPA Non-Compliance?

The U.S. Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”) are the primary agencies tasked with enforcing the FCPA. These agencies take allegations of FCPA violations very seriously, motivated in large part by the damage that bribery and corruption of foreign officials can cause to the interests of the United States. Prosecutions under the FCPA have increased in recent years, with both companies and individuals being targeted.

Due to the risk of federal prosecution, companies that do business with foreign entities must implement compliance programs that are specifically designed to prevent, detect and allow for appropriate response to transactions that may run afoul of the FCPA. In addition to helping to prevent and remedy FCPA violations, adopting a robust compliance program also demonstrates intent to follow the law and can create a positive view of your company in the eyes of federal authorities.

“Implementing an effective FCPA compliance program serves a number of important purposes. Not only can companies mitigate the risk of their employees engaging in corrupt practices, but they can also discourage corrupt conduct by other entities and demonstrate to federal authorities that they are committed to complying with the law.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.

If your company is targeted by the DOJ or SEC for a suspected FCPA violation, it will be important to engage federal defense counsel promptly. Having counsel available to represent your company during an FCPA investigation is crucial for protecting your company and its owners, executives, and personal against civil or criminal prosecution.

Why Should Companies Implement FCPA Compliance Programs?

Here are 10 of the most important reasons why companies that do business with foreign entities need to adopt comprehensive and custom-tailored FCPA compliance programs:

  1. The FCPA is an invaluable tool in the federal government’s fight against foreign corruption.

    • The FCPA is a massive piece of legislation that is designed to allow the DOJ and SEC to effectively combat corruption and bribery involving foreign officials. Ultimately, enforcement of the FCPA is intended to eliminate the costs of foreign corruption to the United States.

    • An effective and robust FCPA compliance program promotes these objectives while also protecting companies and individuals against civil liability and criminal prosecution.

  2. Anti-corruption laws like the FCPA promote ethical conduct.

    • Companies that have comprehensive policies against bribery and corruption send a strong message to other companies and foreign officials that they are committed to aiding in the federal government’s fight against corruption.

    • Foreign officials are less likely to ask for bribes from companies that promote an anti-corruption corporate environment through their compliance policies and procedures.

    • Compliance with anti-corruption laws promotes positive morale among company personnel who feel the pride of working for a company that is committed to transparency and ethical conduct.

  3. The FCPA allows companies to develop strong internal controls and avoid a slippery slope toward an unethical culture.

    • Companies that regularly utilize bribes in their business operations are likely to eventually encounter multiple problems, both in the U.S. and abroad.

    • Once a foreign official knows that a company is willing to pay bribes, that foreign official will request larger bribe amounts. In order to continue business operations in the relevant jurisdiction, company personnel may continue to accept the foreign official’s terms and pay larger bribes.

    • If left unchecked, corrupt practices can become so prevalent that they create enormous liability exposure for the company.

    • Maintaining a focus on FCPA compliance allows companies to develop effective internal controls that promote efficiency in their business operations.

  4. The FCPA reduces the societal costs of corruption.

    • Corruption increases costs to society. This includes political, social, economic, and governmental costs resulting from unethical business conduct.

    • By adopting and enforcing strong FCPA compliance programs, companies can help reduce these costs.

  5. The FCPA reduces the internal business costs of corruption.

    • Corporate success depends on certainty, predictability, and accountability. An environment where corruption is rampant costs companies time and money, and it can lead to disruptions in the continuity of their business operations.

    • FCPA compliance instills predictability in investments, business transactions, and dealings with foreign officials.

  6. Corruption and bribery create an unfair business environment.

    • Companies are more likely to be successful in an environment that emphasizes fair competition, and in which all competitors sell their products and services based on differentiation, pricing, and efficiency.

    • Corruption and bribery allow for unfair results in the marketplace. For instance, companies that utilize bribes can achieve increased sales and increased market share despite offering an inferior product at an uncompetitive price.

  7. The penalties under the FCPA encourage compliance and accurate reporting.

    • The penalties imposed under the FCPA incentivize the disclosure and reporting of statutory violations. These penalties include fines, imprisonment, disgorgement, restitution, and debarment.

    • Whistleblowers can receive between 10% and 30% of amounts the federal government recovers in FCPA enforcement litigation, and this provides a strong incentive to report violations as well.

    • The risk of significant penalties is an important factor for companies to consider when deciding how much time, effort, and money to invest in constructing an FCPA compliance program.

  8. Anti-corruption laws foster business expansion and stability both domestically and globally.

    • For companies that plan to expand domestically or internationally, success depends on the existence of a competitive environment in which companies compete fairly based on product differentiation, price, and other market factors.

    • Fair competition and growth opportunities are hampered when competitors can simply bribe their way to success. Therefore, FCPA enforcement is essential to maintaining fair competition.

    • DOJ and SEC investigations can severely disrupt efforts to maintain stability and predictability, and they can lead to significant financial and reputational harm.

  9. Corruption leads to human rights abuses.

    • Companies that regularly utilize corruption and bribery to achieve their business goals often resort to other illegal practices as well. This includes forced labor and child labor.

    • These types of human rights abuses are commonplace in countries where corruption and bribery are widespread.

    • To reduce the risk of these human rights abuses, it is crucial for company personnel to be educated on the potentially disastrous consequences of corruption and bribery.

    • Developing a robust compliance policy is the best way to educate personnel, reduce the risks of corruption and bribery, and eliminate the human rights abuses associated with these risks.

  10. The FCPA encourages open communication between companies and their legal counsel.

    • With regard to FCPA compliance, it is a legal counsel’s job to represent the best interests of the company and help the company foster an environment of ethical conduct. Achieving these objectives requires open and honest communication between the company and legal counsel.

    • Due to the severe sanctions imposed under the FCPA, companies are incentivized to hire counsel to advise them with regard to compliance and to adopt and implement effective FCPA compliance programs.

Effective FCPA Compliance Programs Help Companies Avoid Costs, Loss of Business Opportunities, and Federal Liability

Working with legal counsel to develop robust FCPA compliance policies and procedures can help prevent company personnel from offering bribes and engaging in other corrupt practices while also encouraging the internal disclosure of suspected violations. Failing to maintain adequate internal controls and foster a culture of compliance can be detrimental to a company’s operations, and FCPA violations can lead to civil or criminal prosecution at the federal level. As a result, all companies that do business with foreign entities would be well-advised to work with legal counsel to develop comprehensive FCPA compliance policies and procedures. 

Oberheiden P.C. © 2020 National Law Review, Volume X, Number 206
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About this Author

Dr. Nick Oberheiden Federal Defense Lawyer Oberheiden PC

Dr. Nick Oberheiden focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation. He has defended clients in PPP Loan Fraud cases and COVID-19 investigations. Nick also directs internal corporate investigations and he leads defense teams in whistleblower actions, corporate defense cases, as well as cases involving national security and elected officials.

Clients from more than 45 U.S. states have hired Nick to seek effective protection against government...

888-680-1745
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