Issue-Spotting and Compliance Best Practices
Written By Milos Barutciski and Mike Koehler
An understanding of the Foreign Corrupt Practices Act (FCPA) and Corruption of Foreign Public Officials Act (CFPOA) provides a framework to consider how, when and why these laws are enforced. A holistic view of your company’s policies and procedures as they relate to corruption and bribery eases the adoption of compliance best practices.
Here are 10 key FCPA and CFPOA considerations to inspire issue-spotting in the workplace.
1. It is a myth that the FCPA applies only to U.S. companies and citizens.
Approximately 300 Canadian companies have securities registered with and/or report to the U.S. Securities and Exchange Commission. Any foreign company or foreign national is subject to the FCPA’s anti-bribery provisions, books and records and internal control provisions to the extent a bribery scheme has a U.S. connection.
2. Anti-bribery provisions include the value/benefit of the bribe.
As described by the CFPOA: giving, offering or agreeing to give or offer a loan, reward, advantage or benefit of any kind; and the FCPA: 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. Foreign officials can be influenced in many different ways besides cash payments. The FCPA is properly read to cover providing valuable favours to foreign officials, as well as providing cash, tangible gifts, travel or entertainment. There is no de minimum value.
3. Internships and job opportunities for family members of alleged foreign officials.
Some questions to consider include:
- Do HR employees receive CFPOA/FCPA training?
- Is a foreign official requesting the internship or job opportunity?
- Is there an actual open position?
- Does the applicant possess the requisite skills and qualifications?
- Is the applicant subject to the company’s normal HR process?
4. Corrupt intent is not an explicit element in the CFPOA.
All that is required is the specific intent to obtain an advantage as consideration for the benefit. Corrupt intent is required for both business organizations and individuals to be found liable for anti-bribery violations according to the FCPA. It does not matter if the payment was first proposed by a foreign official or the actor does not known his conduct is illegal or that he has any specific intent to violate the law.
5. The meaning of “foreign official” determines whether a criminal law applies to an interaction in the global marketplace.
Enforcement actions are increasingly based on allegations concerning internships, sports tickets, travel and entertainment and other inconsequential things of value such as flowers or liquor. The underlying activity is legal and socially acceptable in most situations. Yet, when such things are provided, directly or indirectly, to a “foreign official”, government may call it bribery. Foreign officials are bona fide government officials, like presidents and heads of state, or employees of government departments or agencies, including taxes, customs, duties, licenses, permits. Employees of state-owned enterprises are also considered “foreign officials”. State-owned enterprises have many attributes of private businesses, employ nationals and non-nationals alike and often engage in business outside of the home country. State-owned enterprise employees are considered foreign officials.
6. Retaining or obtaining a business advantage.
The FCPA’s anti-bribery provisions apply to payments or things of value to “foreign officials” for the purposes of influencing any act or decision, in securing improper advantage, inducing the foreign official to act in violation of their lawful duty, or inducing the foreign official to use his or her influence with a foreign government or instrumentality thereof to affect or influence any act or decision. The CFPOA states that in order to obtain or retain an advantage in the course of business, directly or indirectly, a value or benefit of any kind is given, offered or agreed upon, for the benefit of a foreign public official. The advantage does not apply solely to foreign government procurement; potentially any improper advantage that helps the company do business in the foreign country is considered.
7. A substantial majority of enforcement actions involve third party conduct.
In addition to direct payments to foreign officials, the anti-bribery provisions also prohibit payments to “any person, while knowing that all or a portion of such money or thing of value will be … given to any foreign official”. While the third-party payment provisions are not strict liability, the knowledge standard is board and includes concepts such as willful blindness and conscious disregard.
8. Key risk management questions to ask.
- Was the thing of value requested by the foreign official?
- Does the company believe that providing the thing of value will advance a business interest?
- Is providing the thing of value consistent with company policy?
- Were normal company procedures followed in providing the thing of value?
9. Risk management best practices.
No compliance program can prevent all misconduct; risk cannot be eliminated. However, a company that acts consistent with best practices can best minimize risk and will likely be in a better position should non-compliance occur. The goal is to negate the third-party payment provisions to best position the company should a third party act inconsistent with the company’s pre-existing compliance policies and procedures. A parent company should employ pre and post engagement policies and procedures—questionnaires, acknowledgement letters and written agreements—not just to its own third parties, but also third parties engaged by subsidiaries and affiliates over which the parent company exercises control and supervision.
10. Compliance best practices.
- Make use of compliance tools and metrics, including FCPA guidance, DOJ principles of prosecution, and DOJ evaluation of corporate compliance programs.
- Conduct risk assessments and offer training to officers, directors, third parties and employees in high-risk job functions as informed by a risk assessment.
- Effectively communicate compliance expectations through written policies and procedures in plain English, avoiding legalese.
- Assign responsibility for the oversight and implementation of the compliance program to one or more specific senior managers.
- Implement an effective system for confidential, internal reporting of compliance violations by employees and third parties and have sufficient resources for investigating and documenting allegations of violations.
Professor Mike Koehler of FCPA Professor and Milos Barutciski, Partner at Bennett Jones, presented an overview of these 10 key considerations along with other critical elements of the FCPA and CFPOA to inspire issue-spotting in the workplace at a Bennett Jones hosted event, What Canadian Companies Need to Know About Effective Compliance with Canadian, U.S. and Global Anti-Corruption Laws, in October 2017.