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DOJ and SEC release FCPA Guidance

Late last year, the Criminal Division of the U.S. Department of Justice (DOJ) and the Enforcement Division of the U.S. released FCPA guidance, entitled “A Resource Guide to the U.S. Foreign Corrupt Practice Act”( the “Guide”).

The Guide outlines the FCPA statute and offers some insight into the enforcement priorities and approaches of the DOJ and SEC, as well as illustrates the government’s broad reading of several areas of the FCPA, including for example (1) what it means to make a payment for the purpose of “obtaining or retaining business”, (2) the definition of a “foreign official” and (3) the low threshold for the knowledge required to impose liability on a company based on a third party’s or agent’s conduct.

The Guide offers statements as well as hypotheticals regarding FCPA-related issues, including examples of actual enforcement cases that help identify red flags and risk factors to consider when developing, implementing and enforcing a compliance program. For example, a couple of the areas highlighted by the DOJ and SEC included the following:

  1. Third Parties: The Guide highlighted that companies will be held liable for the conduct of their third parties, including agents, independent contractors, and consultants. The Guide emphasized that companies that are aware of the probability of misconduct may be held liable even if they do not possess actual knowledge of the misconduct. Noting also that due diligence on third parties is a must.
  2. Gifts and Entertainment: While not confirming a minimum threshold value for what might amount to which gifts or entertainment might be considered “corrupt”, the Guide confirmed that modest gifts and entertainment are acceptable, provided there is no corrupt intent or purpose, and that they were tied to the promotion of a company’s services or products.
  3. Hallmarks of an Effective FCPA Program: The Guide made it clear that in deciding whether or not to take enforcement action against a company for FCPA violations, the government will consider whether or not the company has an effective compliance program in place. Some of the “hallmarks of an effective compliance program” include:
    • A commitment from senior management to anti-corruption and ethical business practices, and a clearly articulated policy against corruption.
    • A Code of Conduct and compliance procedures that are clear, concise and accessible to all employees.
    • Dedication of sufficient resources and appropriate authority with adequate autonomy for oversight.
    • Training and continuing advice (to employees and agents).
    • Risk-based due diligence and ongoing monitoring of third parties.
    • Enforcement of the FCPA program through incentive and disciplinary measures.
    • Confidential reporting mechanism.
    • Continuous improvement of the program through periodic testing and review.
    • Pre-acquisition due diligence and post-acquisition integration for mergers and acquisitions.
  4. Definition of a “Foreign Official”: The Guide further illustrated the government’s broad interpretation of who
    is a “foreign official” and what constitutes an “instrumentality” of a foreign government.

    • The Guide notes that “the FCPA broadly applies to ‘any’ officer or employee of a foreign government and to those acting on the foreign government’s behalf. The FCPA thus covers corrupt payments to low-ranking employees and high-ranking officials alike.”
    • The operative word used throughout the Guide when describing a foreign official was “any”. Noting that the FCPA applies to corrupt payments made to “(1) any foreign official, (2) any foreign political party or official thereof, (3) any candidate for foreign political office; or (4) any person, while knowing that all or a portion of the payment will be offered, given, or promised to an individual falling within one of these three categories.”

Click here to view the complete version of the FCPA Guide.