FCPA Requirements: Building an Anti-Corruption Compliance Program
When my team talks to HR professionals about the topic of compliance, there are some usual suspects that come up: Anti-harassment, workplace safety, substance abuse, diversity. Rarely do the topics of bribery, anti-corruption, or FCPA requirements get mentioned as part of a compliance program—but this is becoming a topic that every business with foreign dealings will need to know about.
Which also means that businesses will need to make it part of their compliance training. Here I’ll give an overview of why this is becoming an issue, and how to start building an effective compliance program to monitor and remediate practices that could cause an issue.
Why Are Bribery and Corruption Now in the Spotlight?
In recent years, the federal government has been cracking down on corrupt foreign business practices, particularly bribery, by enforcing something known as the Foreign Corrupt Practices Act (FCPA).
The FCPA basically states that U.S. companies are not allowed to pay (or offer, promise, or authorize payment to) a foreign official, international organization official, political party, political party official, or candidate for political office to obtain or retain business.
While the FCPA has technically been around since the 1970s, the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have stepped up their enforcement of the act in recent years. Even with a pilot program allowing businesses to “self report” to avoid further penalty, there were approximately $1.1 billion in resolution payments made in the first quarter of 2019 alone.
What Employees Need to Know About FCPA Requirements
Your employees do not need to know all of the legalistic language around the act itself, but they should have a crystal-clear understanding of what sorts of behaviors are deemed out of bounds.
For example, they should know that:
- Giving a bribe to any of the above-listed foreign entities is clearly illegal,
- Even mentioning or offering such a bribe is still illegal, even if the bribe never gets paid, and
- Prosecution is possible even if an employee is a citizen of another country and does not live in the U.S.
There does need to be a conscious act, however. Innocent mistakes are not illegal under the FCPA. Gift giving, of the typical sort businesses engage in as a show of respect, is also not illegal...as long as it is properly recorded and transparent.
Benefits of an Effective Compliance Program (Addressing FCPA Requirements)
Compliance with the FCPA is one area where a little bit of training and preparation can go a long way to prevent misunderstandings and avoid hefty fines. It makes sense to fold FCPA compliance into whatever compliance training your company is already doing. (If you need content for doing this, we offer a full selection of banking and financial skills training topics).
First, having an effective compliance training program around the FCPA helps reduce the risk that your employees break the law. Many times, employees wrongly think that bribes to officials are somehow helping the business. Proper training can disabuse them of that idea. Or, they might think that “greasing the palm” of some officials is just the way business is done in some parts of the world, and that small payments are harmless. Again, proper training can outline what is, and is not, acceptable in the eyes of the law.
Second, having a good compliance program (both training and systems) can stand as “evidence of good faith” if an employee does violate the law. For example, suppose someone acting on behalf of your company in China makes an unauthorized, “off the books” payment in return for favors. This catches the attention of the DOJ. If you can show that you have a functioning compliance program in place, the DOJ will take that into account as evidence that your company is trying to do the right thing. While they still might prosecute the employee, the company might avoid stiffer penalties. (Please note that I am not a lawyer—if you have specific questions about this, please contact a legal professional!)
Ingredients for an Effective FCPA Compliance Program
I won’t go into all the details of an effective program here; our training video on effective FCPA compliance programs does that. What I will do is list the main ingredients of such a program:
- They set the right tone. Senior management takes the issue of bribery and corruption seriously, and sets the right tone for the rest of the company.
- There are clear lines of responsibility. There is a single person or group, with authority, that has overall responsibility for FCPA compliance.
- The company has a policy or code of business ethics. The policy or code of ethics should be in writing and communicated to employees, and it should explicitly prohibit corrupt payments to foreign officials (candidates for office, etc.).
- There’s a detailed roadmap. By this I mean there should be detailed procedures, standards, and guidance to address specific issues that arise.
- They use incentives and disciplinary measures. There need to be consequences when employees act outside of the company’s policies. For some companies, simply publicizing disciplinary actions is enough to deter employees. We’ve found that positive incentives work, too, especially when encouraging employees to report possible violations. Every company will have to find the right mix of “carrot and stick.”
- Systems are in place. Specifically, there needs to be systems to detect and investigate suspected violations and remedy them. For example, there are often red flags that the DOJ looks for to suspect FCPA violations, such as unusual payment patterns and financial arrangements. Your company's own internal systems should be set up to alert responsible parties of these internally so that it can do its own investigation and possibly take action.
To Learn More
The recent crackdown on FCPA violations has revealed that such violations are pretty common, and that many organizations do not have a good compliance program in place. But as I said above, this is one area where a little bit of training and preparation can go a long way.
If you would like to find out more about adding FCPA compliance training to your existing compliance training, check out these resources:
- Compliance Training Topics
- Bank and Financial Skills Training Topics
- How is Compliance Training Different from Other Training?