International Anti-Corruption Regulatory
Trends And How To Prepare For Increased
Foreign Enforcement
Ariana N. Sarabia
Gary R. Chadick
Partners at
McKenna Long & Aldridge LLP
Contact Information:
Ariana-213-243-6144
Gary- 213-243-6155
804922135
mckennalong.com
Overview
There has been a global increase in enforcement against corrupt
business activities.
• More foreign governments are passing anti-corrupt legislation.
• Foreign regulators have begun to enforce their own existing
domestic anti-corruption laws, sometimes in coordination with
American investigations.
• Global watchdogs are highlighting certain “high-risk” industries and
geographic locations.
• Here in the U.S., FCPA settlement amounts increased in 2014.
• Chinese cases top the list for ongoing FCPA investigations.
• Despite progress, enforcement is still poor in some surprising
countries.
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More Foreign Governments Are Passing
Anti-Corruption Legislation
UKRAINE
• Ukraine has a new anti-corruption law.
• New anti-corruption bureau is expected to be different from prior
ineffective agencies.
BRAZIL
• Brazil’s anti-corruption bill Passed in the House of Representatives.
• Brazil has an extraordinary number of anti-bribery enforcement
authorities.
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Foreign Regulators Have Begun to Enforce Their Own
Existing Domestic Anti-Corruption Laws, Sometimes In
Coordination With American Investigations
Despite the lack of significant regulatory reform in Asia, many regulators are stepping up enforcement
efforts, perhaps signaling the public’s intolerance with the degree of corruption.
HONG KONG
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In Hong Kong, the Independent Commission Against Corruption (ICAC) is increasing investigations
under the Prevention of Bribery Ordinance (POBO), which is broader in scope than the FCPA.
•
The Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), effective 2012, is
finally being enforced.
•
U.S. and Hong Kong are working together (e.g., recent extradition of an executive charged with
commercial bribery from the U.S. to Hong Kong to face trial).
CHINA
•
The Chinese Communist Party launched a high-profile anti-corruption campaign against public officials
and private businesses.
•
China is focusing on certain “high risk” sectors in accordance with the joint judicial interpretation by the
Supreme People’s Court and the Supreme People’s Protectorate regarding aggravating circumstances
pertaining to bribery of supervisory officials in key industries, including:
pharmaceuticals
medical devices
food products
energy
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Global Watchdogs Are Highlighting Certain
“High-Risk” Industries and Geographic
Locations
According to the December 2014 Foreign Bribery Report of the
Organization for Economic Cooperation and Development (“OECD”),
two-thirds of foreign bribery cases occurred in these four sectors:
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extractive/mining (19%),
construction (15%)
transportation and storage (15%)
information and communication (10%)
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Here In The U.S., FCPA Settlement
Amounts Increased In 2014
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In 2014, ten companies paid $1.56 billion to resolve FCPA cases.
In 2013, twelve companies paid $731.1 million to resolve FCPA cases
In 2012, twelve companies settled FCPA enforcement actions by paying a total of $259.4
million
In 2011, 15 companies paid $508.6 million
In 2010, 23 companies paid $1.8 billion
In 2009, 11 companies paid $644 million
In 2008, 11 companies paid $890 million
In 4 of 6 corporate FCPA enforcement actions where an analysis was possible, the DOJ agreed
to a criminal fine below the minimum range suggested by the sentencing guidelines. In these 4
actions, the average was approximately 29% below the minimum guidelines range and the
distribution range was 9% below the minimum guidelines range (Avon) to 53% below the
minimum guidelines range (Alcoa). In 2 corporate FCPA enforcement actions in 2014 (Alstom
and Marubeni), the company paid a criminal fine within the guidelines range.
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Chinese Cases Top The List For Ongoing
FCPS Investigations
There are currently over one hundred ongoing FCPA investigations. The alleged FCPA violations pertain to
corruption in the following countries:
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China – 40 investigations
Brazil -- 10 investigations
Russia -- 9 investigations
Libya -- 7 investigations
India -- 7 investigations
Poland – 4 investigations
Mexico – 4 investigations
Angola – 4 investigations
Saudi Arabia – 4 investigations
South Africa – 4 investigations
Italy – 4 investigations
Argentina – 3 investigations
Germany – 3 investigations
Kenya – 3 investigations
Romania – 3 investigations
Uzbekistan – 3 investigations
See http://www.fcpablog.com/blog/2015/1/7/country-count-for-the-corporate-investigations-list
january.html#sthash.cjl9ipr4.dpuf
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Countries with Surprisingly Poor
Enforcement
• France: In December 2014, the OECD highlighted France's
lack of initiative in cases involving French enterprises and
bribery.
• Turkey: Turkey’s parliament voted to acquit four former
ministers who faced graft charges. Transparency
International slammed the vote.
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How To Prepare For Increased Foreign
Enforcement
• Perform A Compliance Risk Assessment of Your Company’s
Compliance With All Applicable Anti-Corruption Laws
Identify High, Medium, And Low Risk Foreign Third Parties
• Understand Where Your Company Does Business Internationally
And Foreign Third Parties Critical To International Business
• Understand The Anti-Corruption Laws And Enforcement Trends
In Those Countries
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Elements Of An Effective Anti-Corruption
Compliance Program
• Develop An Effective Anti-Corruption Compliance Program
Assign Senior Leadership
Perform the Compliance Risk Assessment
Have Explicit Company Policies, Processes And Internal Controls
Provide Communication And Training (Employees And Third Parties)
Conduct Due Diligence Of Foreign Third Parties, Implement A Review And PreContract Approval Process And Include Anti-Corruption Terms In The Contract
Monitor And Audit Third Party and Employee Adherence to Contract and Internal
Processes
Provide An Ethics Help/Hotline
Take Disciplinary and Corrective Actions When Necessary
Conduct Effectiveness Review Of The Program
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Elements Of An Effective Risk Based
Third Party Due Diligence Program
• Develop An Effective Risk Based Due Diligence Program
Use A Questionnaire To Obtain Business, Ownership, Financial and Other Information
From The Third Party
Obtain Financial, Business License Registration Or Other Due Diligence Information
From Commercial Vendors
Trace International, Dun And Bradstreet, Kreller, etc.
Perform Phone Or Face To Face Interview and Training
Call Or Visit The U.S. Embassy
Check Business References (Other U.S. Companies Preferred)
Obtain An In-Country Lawyer Legal Opinion
Check Denied Party List Through Commercial Vendors
Such As Management Dynamics Or Thomson Reuters’ World Check
Conduct Internet Searches For Ethical Or Dishonest Conduct
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Elements of An Effective Contracting
Process
• Develop An Effective Contracting Process
An Internal Review And Approval Process Before Contracting (Assess the Integrity
and Reputation Of The Third Party Based On The Due Diligence Materials)
Pre-Contract Training On Anti-Corruption Laws And Company Policies And
Processes
A Contract Containing Anti-Corruption Covenants, Indemnification, Termination
and Audit Rights Provisions
• Monitoring Activities And Adherence To The Contract
• Establish A Risk Based Contract Renewal Process
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Other Elements Of An Effective AntiCorruption Compliance Program
• Internal Controls Need To Be Put In Place
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Bank Accounts – Clear Delegation Of Authority And Internal Controls
For Creating Account And Withdrawing Cash
Sales Rep/Consultant Invoices – Need To Match Invoices To
Compensation Terms In Their Contracts
Books And Records Need To Be Accurate And Fairly Represent
The Transactions
Payments Need To Be Accurately Described In Your Company’s Books
And Records
“Facilitation Payments” Need To Be Clearly Identified As Such
Training And Periodic Audits Needed
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How MLA Can Assist Clients
• Review Your Company’s Existing Anti-Corruption Compliance Program And
Make Enhancement Recommendations
• Strengthening Particular Elements Of Your Program
Provide Country Analysis On Anti-Corruption Laws And Enforcement Trends
Enhance Existing Policies, Processes Or Contract Terms
Strengthen Your Risk Based Due Diligence Program
Prepare Or Provide Anti-Corruption Training And Communication Materials
• Conduct Investigations Of Noncompliance Allegations
Provide Recommendations And Draft Disclosures To The Government If Necessary
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