Ongoing global business connections provide great benefits, but also conceal great risks. This has led to increased cooperation between corporations and multi-national government agencies to uncover FCPA violations. As a result, there has been an increase in multi-jurisdictional FCPA cases, and other countries began adopting FCPA laws similar to those in the United States.
Individual FCPA enforcements have also risen. Thirty-six individuals were charged by the Department of Justice (DOJ) and Securities and Exchange Commissions (SEC) for FCPA connected misconduct.
In the first quarter of 2021, things were quieter, due in part to the COVID-19 shutdowns. There is no better time than now to be proactive in safeguarding your business.
Consequences for FCPA violations are on both an individual and enterprise level
Bribery Violations/per violation
- Enterprises – Criminal penalty of up to $2,000
- Individual – Criminal penalty up to $250,00 and five years of imprisonment
- Enterprises and Individuals – Civil penalty up to $16,000
Accounting Violations/per violation
The following are basic guidelines, additional penalties that may be imposed include: injunctions, forfeiture of associated profits, forfeiture of assets, and suspension (or in some instances banning) from doing business with the government. Unlisted costs are loss to reputation, effects on company and staff performance, and future revenue.
- Enterprises – Criminal penalty of up to $25,000,000
- Individuals – Criminal penalty of up to $5,000,000 plus up to 20 years imprisonment
- Enterprises – Civil penalty of up to $750,000
- Individuals – Civil penalty of up to $150,000
Second Quarter 2021 FCPA Highlights
A UK-based global engineering firm and subsidiary of John Wood Group plc, agreed to pay $48 million in settlement of FCPA agent-related offenses related to a bribery scheme to pay Brazilian officials in exchange for an approximately $190 million contract to design a gas-to chemicals complex.
- Ongoing Investigations: Approximately 111 FCPA investigations are open (6/2021):
This number is something to note; along with the impact of COVID-19 related shutdowns and difficulties in conducting interviews over this period, things have been slow moving, but with more than 100 open investigations are likely to pick up speed.
It is critical for businesses to have a robust and vigorous compliance program which encompasses internal risk management and due diligence practices, including: regular board and executive background checks—a deeper dive than standard background checks—along with requests to perform due diligence on business partners, contractors, and your supply chain.
Prior to any M&A transactions, executive due diligence should also be conducted. Whether hiring at home, abroad, or acquiring foreign businesses, it is critical to perform effective executive due diligence with an investigative firm that specializes in this type of deep dive due diligence. A background check will not yield hidden or undisclosed information. If the executives have lived or worked internationally remember to verify this information also.
These “deep dive” due diligence investigations must be very thorough to keep you, your board, your investors, and your business safe from bad actors and rogue players. Preventative measures are an essential best practice in risk management that every business should adopt, both at the individual and corporate level.