Global Connection - November 2013: Anti-Corruption On a Global Scale: The FCPA is No Longer Considered the Only Game In Town

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The Global Connection has extensively covered the U.S. Foreign Corrupt Practices Act (“FCPA”) over the years. With the advent of the U.K. Bribery Act, the FCPA was finally having real competition by another country as a result of a multi-lateral international effort, specifically the United Nations Convention Against Corruption and the Organization for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, to combat bribery of not only government officials, but now private individuals. Furthermore, countries that had anti-corruption laws on the books, but that were rarely enforced, have now revamped the statutory framework and have actively initiated investigations of multi-national companies. Such anti-corruption enforcement is not necessarily new, but the increased efforts are recognition that governments will no longer ignore even the smallest corruption transgressions.

Regardless of the advancement by other countries, the FCPA will remain the benchmark for anti-corruption laws for the foreseeable future. The FCPA prohibits the bribery of a foreign government or international organization officials to obtain a business advantage. The bribe does not need to be large and can be based on a quid pro quo arrangement. Although a “graft” or facilitation payment, which is the paying for a government service for which an unfair advantage is not obtained, is allowed (e.g., pay for the telephone service to be installed), this is a still a gray area that wearies many companies working abroad.

The U.K. Bribery Act, among other variances, takes the FCPA two steps forward. The British law prohibits any bribery, not just involving government officials, and does not have the “graft” exception. But, the U.S. does have similar laws when the U.S. Travel Act, which prohibits the utilization of interstate commerce for any criminal act, is combined with individual State laws that prohibit both governmental and commercial (i.e. non-governmental) bribery. China has a similar model when the People’s Republic of China (“PRC”) Criminal Law, and Article 8 of the PRC Anti-Unfair Competition Law are combined. Russia also prohibits commercial bribery pursuant to the Russian Criminal Code and heightened enforcement under Russia’s laws is expected due to the issuance of recent interpretative guidance by Russia’s Supreme Court.

Utilizing the FCPA as a model, other countries are also amending their anti-corruption statutes. For example, in August 2013, Brazil passed the Brazilian Clean Companies Act to hold companies accountable. The Brazilian law, which is effective in January 2014, is more similar to the FCPA than the U.K. Bribery Act in that the law targets “public” corruption, and not commercial bribery. However, unlike the FCPA, which requires a minimal knowledge (or should have known standard) of the corruption, the Brazilian law is similar to the U.K. Bribery Act and only requires a showing of an intent to benefit the company. Also similar to the U.K. Bribery Act, the Brazilian law provides incentives for a well-geared company policy to avoid such acts. Finally, similar to the U.S. and U.K. laws, Brazil encourages voluntary disclosures concerning alleged violations.

In June 2013, Canada also made changes to its Corruption of Foreign Public Officials Act to make it more in line with the FCPA. Similar to the FCPA accounting requirements for publicly traded companies, Canada’s law has instituted similar provisions that are wholly separate from the bribery acts. The U.S. has utilized the FCPA provisions successfully in the past, most notably when investigating the United Nations’ Food for Oil Program, when the bribery “act” could not be fully prosecuted to a “beyond a reasonable doubt” criminal burden of proof. However, the Canadians adopted a similar provision to the U.K. Bribery Act that prohibits “graft” or facilitation payments.

These are only a few examples of the multiple changes to countries’ anti-corruption charges. Although the asserted rationale for such changes is for countries to come into line with their international treaty obligations, the significant financial penalties paid to the U.S. and other countries that have resulted from international investigations of several multi-national corporations cannot be ignored.

Anti-corruption compliance is now a booming industry. However, a “cookie-cutter” approach to corporate policies and training is not necessarily effective. Rather, companies must review which countries it is doing business with and ensure that the “umbrella” policy covers all those countries’ anti-corruption laws. This is especially the case due to the extra-territoriality of the various countries’ laws. If a company is doing business in China, but has operations in Brazil and Britain, the company must ensure it is following all of these counties’ laws in each separate country it is doing business. Simply, the strictest law on a various point controls. Hence, “graft” or facilitation payments should be extremely rare if not outright prohibited for future business activities.

In addition to having policies and training catered for the company, individual agreements must contain appropriate safeguards that may assist in the mitigation of a future violation. The reality is that many current alleged violations are done by the acts of third parties, such as consultants or distributors. Clear language prohibiting bribery is necessary in these agreements.

Furthermore, when an allegation of possible corruption is discovered, company officials must take the allegation seriously, regardless of the severity of the allegation. There has been a trend in utilizing outside consultants or account agencies to investigate such allegations. However, at least in the U.S., such investigations are not necessarily privileged and it is important to engage legal counsel to ensure that the company is protected and advised appropriately. Such advice may include voluntarily disclosing the allegation – regardless of how ridiculous the factual scenario – to governmental agencies in multiple countries. Coordination of such voluntary disclosures is vital. The various governmental agencies from the different countries do discuss reports of corruption. So, it is important that there is “one voice” in interacting with governmental agencies.

The development in anti-corruption efforts on a global scale is not new. But, new developments require constant awareness to any changes and ensuring future compliance at every level in an operation.