FCPA enforcement continues unabated and is impervious to political changes at the Justice Department – that could be the headline of 2018. We are seeing that Democrats and Republicans alike are committed to aggressively enforcing FCPA as part of a global initiative to fight corruption.
While the United States continues to lead the fight against corruption, more countries are joining in the effort. The global risk of detection has increased exponentially as prosecutors and law enforcement work together across country lines to bring forth coordinated enforcement actions and develop more formalized information sharing mechanisms.
Today’s collaborative enforcement environment gives multinationals even more reason to invest in anti-corruption compliance programs designed to prevent corrupt schemes
Today’s collaborative enforcement environment gives multinationals even more reason to invest in anti-corruption compliance programs designed to prevent corrupt schemes and protect a company’s global operations and reputation. Global companies have to tailor their anti-corruption compliance strategies to create risk profiles that continuously evolve as business operations and global enforcement practices change.
The State of Third-Party Risk
Third-party risk and foreign government contracting continue to dominate the FCPA enforcement landscape. In 2018, the United States Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) brought FCPA enforcement actions totaling $1.3 billion in fines, penalties and disgorgement. Additionally, the DOJ increased criminal enforcement from 17 individual cases to 26 individual cases. The DOJ and the SEC brought a total of 49 enforcement actions, 19 against companies, 30 against individuals and 4 declinations (two of which included disgorgement penalties).
In 2018, the United States Department of Justice and the Securities and Exchange Commission brought FCPA enforcement actions totaling $1.3 billion in fines, penalties and disgorgement.
The DOJ’s close working relationship with international entities, such as Brazilian prosecutors and law enforcement, was evidenced through various prosecutions of companies and individuals growing from Brazil’s “Operation Car Wash.” This was further evidenced when the DOJ and the SEC announced a joint resolution with a Brazil-based petroleum multinational, resulting in a non-prosecution agreement with the DOJ and an administrative settlement with the SEC. To resolve the criminal case, the multinational paid a fine of $853.2 million, but will pay only 10 percent of that to DOJ, with an 80 percent credit applied to fund social responsibility programs in Brazil, and a 10 percent penalty to credit against the civil penalty imposed by the SEC. The bulk of the SEC penalty of $933.5 million will be credited against the shareholders’ class-action settlement.
But these numbers do not tell the entire story. The DOJ demonstrated its willingness to prosecute bribe takers and other corrupt actors by aggressively pursuing money laundering charges against individuals. In doing so, it employed traditional strategies for building complex criminal prosecutions, targeting corrupt institutions.
Crosshairs on Individuals Responsible for FCPA Violations
The DOJ has signaled its willingness to prosecute foreign sovereign officials using innovative strategies and broad jurisdictional sweeps to bring forth charges. Some of these innovations can be seen in money laundering charges based on foreign sovereign official’s use of U.S. bank accounts, and even on the use of a U.S. private correspondent bank accounts.
In the global enforcement world, the United Kingdom’s Serious Fraud Office (SFO), and authorities in France and Brazil, demonstrate their commitment to anti-corruption compliance. The SFO successfully prosecuted Alstom Power executive Nicholas Reynolds, who was convicted after a jury trial to 4.5 years in jail. Reynolds’ co-defendant, John Venskus, plead guilty and was sentenced to 3.5 years in prison; and Goran Wilstrom plead guilty and was sentenced to 31 months.
The DOJ issued a declination to Gurlap Systems Limited for alleged illegal payments to a South Korean government official. In reaching its decision, U.S. prosecutors noted that Gurlap had committed to accept responsibility in the related SFO investigation – three of its executives have been criminally charged by the SFO.
Other Notable Mentions for FCPA in 2018
- Following the enactment of Sapin II, which updated its anti-corruption laws, France actively assisted in a joint prosecution that resulted in a $585 million fine for FCPA violations (and $275 million in a separate LIBOR matter) involving bribes to Libya’s Gaddafi-era officials.
- The DOJ’s FCPA Corporate Enforcement Policy has been expanded as non-binding guidance on all criminal prosecutions of corporations. It has also become applicable to mergers and acquisitions that involve potential FCPA violations.
- The DOJ’s Anti-Piling on Policy and its modifications to the Yates Memorandum will have little discernible impact, since they have been applied in principle prior to the formal announcement of the respective policies.
- In the compliance arena, the DOJ and the SEC continue to focus on corporate internal controls and adherence to aggressive remediation principles. The DOJ and SEC enforcement actions have exploited weaknesses in internal controls, forcing companies to follow higher standards.
- Similarly, the DOJ and SEC have required companies to terminate and discipline senior executives and responsible persons for violations under a broad “knew or should have known” standard as part of remediation requirements. Companies that seek the benefits of the FCPA Corporate Enforcement Policy have to impose rigorous remediation requirements to qualify for a declination with disgorgement resolution.
As you can see, anti-bribery and corruption is the name of the game for global businesses. Enforcement agencies are getting more sophisticated at what they do, and that efficacy is compounded by the growing collaboration between global agencies.