Here’s some news you should take very seriously.
As of August 2022, there are around 100 Foreign Corrupt Practices Act (FCPA) investigations ongoing.
Because the vast majority of FCPA enforcement actions over the past 10 years have involved some form of inadequate, insufficient, or even a total lack of investigative due diligence. And you don’t want to find yourself on the wrong end of the FCPA because your due diligence wasn’t considered thorough enough.
For example, Glencore received a $700 million fine for FCPA violations stemming from foreign bribery and market manipulation charges. In 2020, Goldman Sachs paid a whopping $3.3 billion in financial penalties for bribing high-ranking government officials in Malaysia. And Airbus paid $4 billion to settle global bribery and trade offenses.
More than ever, the DOJ and the SEC are focused on your company’s commitment to ethics and compliance, which includes staying on top of any risks with third-parties you might be using in your supply chain. In fact, 90% of FCPA enforcement actions are against companies who failed to conduct proper due diligence on third party vendors. Federal agencies today know whether or not a company has conducted its due diligence, especially when they investigate potential violations.
Unfortunately, most due diligence conducted by companies themselves find less than 1% of the potential FCPA issues that are out there and “check the box” diligence does not meet regulatory requirements.
To make sure you stay on the right side of any potential violations, you should be conducting deep due diligence on any third parties to determine where they are actually doing business, who they are doing business with, how they are doing business, their financial strength and any risks they may bring to the table. Conducting enhanced due diligence on key executives should not be an afterthought; by then it is too late to protect your business reputation..
Corruption is a critical global risk that can sink your company’s reputation.
The Foreign Corrupt Practices Act (FCPA) was passed to fight worldwide corruption and bribery facilitated by US companies.
As the Department of Justice (DOJ) explains, the FCPA applies to “payments, offers, or promises made for the purpose of:
(15 U.S.C. § 78dd-1(a), 78dd-2(a), 78dd-3(a))
What is bribery: “an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value” are all covered under the FCPA. This also includes behavior occurring inside and outside of the United States.
In simple terms, this means that companies need to ensure that their business practices avoid both corruption and bribery risks overseas. To accomplish this, firms need to ensure that compliance programs are equipped to avoid unnecessary exposure.
And it all starts with Due Diligence!
Conducting deep level due diligence on business partners, investors, customers, and third-party vendors will help your company avoid falling on the wrong side of an enforcement action.
The current administration has emphasized that the federal government will no longer tolerate corporate compliance failures. In fact, the DOJ recently announced hiring 25+ prosecutors tasked with enforcing corporate compliance through the DOJ National Security Division.
Taking a proactive approach is essential to manage risks today and the DOJ expects corporations to take a preventative approach by conducting comprehensive due diligence investigations.
The stakes couldn’t be higher for companies and investors!
The SEC and the DOJ are responsible for the enforcement of the FCPA provisions.
Fines for FCPA violations can easily top $100 million for companies, and individuals can face jail time. Depending on the facts of the case your company may even need to disgorge profits received because of bribery.
For example, Glencore received a $700 million fine for FCPA violations stemming from foreign bribery and market manipulation charges.
In 2020, Goldman Sachs paid a whopping $3.3 billion in financial penalties for bribing high-ranking government officials in Malaysia. And Airbus paid $4 billion to settle global bribery and trade offenses.
FCPA violations also feature heavily in press releases and business media. The reputational damage from violations is also immediate and long lasting, particularly for companies with international operations.
The vast majority of FCPA enforcement actions over the past 10 years have involved some form of inadequate, insufficient, or even a total lack of investigative due diligence conducted. In fact, many FCPA enforcement actions are against companies who failed to conduct proper due diligence on third party vendors.
You don’t want to find yourself on the wrong end of an FCPA investigation because your due diligence wasn’t thorough enough.
Simply put, conducting the right level of deep due diligence can be a game changer!
Most due diligence conducted by companies themselves find less than 1% of the potential FCPA issues that are out there and “check the box” diligence does not meet regulatory requirements.
To avoid FCPA risks, you should be conducting deep due diligence on any third parties to determine where they are doing business, who they are doing business with, how they are doing business. You also need to examine their financial strength and any risks they may bring to the table.
Due diligence investigations evaluate a wide variety of issues including: criminal history; litigious behaviors; in-depth history and lifestyle issues of key staff; the relationship of executives to foreign officials; criminal history; financial and legal issues; civil litigation issues; relationships with other companies and entities; reputation issues; shell company involvement; evidence of fraud; signs of money laundering; financial impropriety; conflicts of interest; anti-competitive behaviors; and numerous other serious issues.
Conducting FCPA due diligence involves checking for past regulatory violations or the potential for future violations based on past patterns of activity. This requires expertise, and Infortal Worldwide has over 39 years of conducting investigations and providing risk-based solutions.
The Infortal Worldwide due diligence investigation process also involves screening companies and individuals through 1700+ databases to scan for regulatory issues.
You need to know about red flags with companies before you work with them to avoid unnecessary risk. Infortal’s due diligence investigations will help you identify signs of corruption before it’s too late.
Infortal Worldwide’s due diligence services include a boots-on-the-ground approach to intelligence collection that will ensure you are equipped with confirmed and actionable information necessary to make the best decisions for your business.
In certain jurisdictions, bad actors can easily hide bad behavior just beneath the surface.
You need to tailor your due diligence investigations to account for local business customs and procedures. This includes understanding how to access important records without violating local laws and regulations.
Infortal Worldwide has a network covering 160+ countries around the world. We’ve conducted investigations in every hemisphere and understand the sensitivities of conducting investigations in highly regulated jurisdictions.
If any FCPA related red flags are identified, we can dig deeper, to further identify the individuals involved and to conduct a full open-source intelligence-based investigation. Infortal Worldwide is a licensed private investigation firm well-versed in the latest investigative tools, AI and other investigative techniques to find undisclosed information.
Reviewing OSINT-based intelligence puts your firm in the strongest position to grow with confidence, knowing that you have a have a true understanding of any hidden risks.
Infortal Worldwide employs a due diligence investigation process focused on providing our clients with clear, easy to understand actionable recommendations™ that allow your team to take tangible actions to facilitate the investment process in a stronger position.
Each FCPA Due Diligence Investigation results in a comprehensive report, which allows your firm to maintain a record of the completed assessment. This report includes citations to the sources reviewed and a clear description of the due diligence methodology.
It all starts with an initial consultation with the Infortal team of experts.
Based on the scale and scope of the deal, Infortal will partner with your deal team to establish a due diligence investigation roadmap that will yield the required information to move forward confidently and protect your investment.
We then employ cutting-edge, industry-leading investigative techniques to ensure that we pull in accurate and definitive intelligence. This includes examining proprietary deep, dark, and historical web resources. We also employ full open-source intelligence (OSINT) investigation capabilities.
Once the investigation begins, communication is fundamental. We provide updates regarding key information throughout the investigation's lifecycle.
Who you do business with matters more than you might think. In fact, your firm’s reputation can become tabloid fodder if you are linked to bad actors.
One of the most common reasons for conducting FCPA due diligence investigations is to ensure there are no hidden FCPA risks associated with third party vendors you contract with, both here in the US and overseas. Remember, you may be responsible for third party behavior once you sign a contract.
Infortal Worldwide’s due diligence services can eliminate the FCPA risks and provide you with the documentation to support your wider compliance program. It is a best practice to conduct up front due diligence on new third-party vendors and then set up a system of periodic reviews to watch out for any changes in risk profiles.
Click here to learn more about: third party risk management.
The FCPA’s anti-bribery provisions apply to conduct occurring outside the United States.
A failure to understand market conditions can ultimately lead to decreased revenues, penalties in the form of fines, or even criminal prosecution. Normal business strategies from the US may expose your business to operational or existential risks in international markets. This is particularly true when considering global FCPA risks.
This makes it extremely important to understand who you are doing business with in new international markets. This requires conducting due diligence on new partners and companies you plan to do business with overseas.
If you’re not aware of the business practices in each country, you could find yourself violating US or international anti-corruption laws. These are liabilities that can be avoided.
In addition, Infortal Worldwide can combine FCPA investigations with our global risk intelligence services to provide a holistic view any international market from a risk management standpoint.
M&A investment is not isolated form FCPA risks. In fact, you may become responsible for the bad actions occurring at company you are seeking to acquire.
While most companies conduct legal and financial due diligence, they often fail to conduct due diligence on the track record of the business and the people behind the target company. This can lead to an inflated valuation.
As Dr. Ian Oxnevad and Christopher Mason from Infortal explained at Corporate Compliance Insights:
With the right approach, companies can mitigate geopolitical risks and reap the benefits of international M&A. In fact, the right intelligence discovered during the M&A due diligence process can come to the rescue and help your company avoid ending up in the crosshairs of an FCPA enforcement action.
Importantly, the DOJ has established a Safe Harbor Policy that offers protections to companies that conduct the proper level of due diligence and self-report any illegal activity taking place at the target acquisition and avoid prosecution for certain illegal acts.
On the buy side, Infortal Worldwide’s due diligence assessments fit neatly into the operational due diligence process conducted before finalizing the deal.
For sellers, it is advantageous to understand the true background of potential buyers. This enhances your negotiation position and ensures trust in the event of an earn-out situation.
Place your firm in a stronger position to excel in the M&A market in 2024 by ensuring that your deal documents actually match reality.
2024: $126 Million Fine
“Trafigura Beheer B.V. (Trafigura), an international commodities trading company with its primary operations in Switzerland, pleaded guilty today and will pay over $126 million to resolve an investigation by the U.S. Justice Department into violations of the Foreign Corrupt Practices Act (FCPA), stemming from the company’s corrupt scheme to pay bribes to Brazilian government officials to secure business with Brazil’s state-owned and state-controlled oil company, Petróleo Brasileiro S.A. – Petrobras (Petrobras).”
2024: $220 Million Fine
“SAP’s resolution with the department stems from schemes to pay bribes to government officials in South Africa and Indonesia. The department’s resolution is coordinated with prosecutorial authorities in South Africa, as well as with the SEC.”
2022: $41 Million Fine
“GOL Linhas Aéreas Inteligentes S.A. (GOL), an airline headquartered in São Paulo, Brazil, will pay more than $41 million to resolve parallel bribery investigations by criminal and civil authorities in the United States and Brazil. According to court documents, GOL entered into a three-year deferred prosecution agreement (DPA) with the Department of Justice in connection with a criminal information filed in the District of Maryland charging the company with conspiracy to violate the anti-bribery and books and records provisions of the Foreign Corrupt Practices Act (FCPA).”
Our due diligence investigations help you understand fraud, bribery and corruption issues so your organization can avoid unnecessary risk exposures.
Protecting your corporation’s Board of Directors, shareholders and employees are part of key risk mitigation strategy.
Infortal has screened workforces for Fortune 100 companies, banks, law firms for 30 years including nationwide and international hires.
