CHINA’S NEW WAVE OF REGULATORY ENFORCEMENT: WHAT MULTINATIONALS NEED TO KNOW
Since Xi Jiping became China’s leader this year, the PRC has seen the launch of an unprecedented, sweeping government campaign to tackle corruption.
The wave of enforcement action against corrupt officials that started with the arrest of the enormously powerful former Chongqing Party Secretary, Bo Xilai, has since surged on. Most visibly, Liu Zhijun, head of the once powerful Ministry of Railways, was sentenced to death for corruption in July; then Mr. Bo was tried and sentenced to life in prison; and then, in early September, state-run media reported that Jiang Jiemin, the former chairman of state-run PetroChina, China’s largest oil company, would be investigated for “suspected serious disciplinary violations.”
As we can clearly see it here in Beijing, the government’s focus is not limited to public officials. In recent months, government authorities have brought a spate of regulatory and investigative enforcement actions against companies in the private sector – including both multinationals and Chinese companies.
Find out more about complying with the PRC’s anticorruption rules.
HONING A COMPLIANT GIFTS POLICY: THE TRENDS WE ARE SEEING TODAY
As the Resource Guide to US FCPA acknowledges, the FCPA does not have a minimum threshold amount for corrupt gifts or payments – which can include providing travel, meals or entertainment. The Guide further advises that gifts of nominal value are unlikely to result in enforcement action when they are “given openly and transparently, properly recorded in the giver’s books and records provided only to reflect esteem or gratitude, and permitted under local law.”
The guidelines companies develop to reflect these principles can vary widely, to address the different industries, cultures and environments in which they operate. While this variety can be frustrating to those seeking definitive guidance, a program and guidelines developed to address a company’s specific risk profile in specific markets is critical, providing useful direction in day-to-day relationships and operations.
See our list of the trends we’ve observed recently in gifts and entertainment guidelines.
RISK-BASED DUE DILIGENCE OF THIRD-PARTY INTERMEDIARIES: A SCORECARD APPROACH
Companies operating internationally often engage numerous – sometimes even thousands – of third parties around the world to help facilitate their business. Alongside the growth of such relationships, the risks posed by them have taken on new significance with the rising tide of anti-corruption and anti-bribery enforcement actions throughout the world.
As a direct consequence, the importance of third-party due diligence cannot be understated. Indeed, the level and thoroughness of third-party due diligence that a corporation undertakes is a factor that the United States Department of Justice and the Securities and Exchange Commission expressly consider when they are deciding whether to prosecute and enforce alleged violations of the Foreign Corrupt Practices Act.
Therefore, ensuring that you complete proper due diligence can make the difference between a third-party relationship that truly adds value to a company and having to tackle expensive, time-consuming and, in the worst case, disastrous problems that may arise in the wake of actions a third party may take on behalf of your company.
Practically speaking, what does risk-based due diligence mean? And how can a corporation engage in risk-based due diligence in a comprehensive but cost-efficient manner?
In this article, we define key factors around risk-based due diligence and then provide a basic scorecard to guide you to a general understanding of the levels of risk posed by third parties who may be providing services for your company in your international operations.
Find our article, and a useful scorecard, here.
DEFERRED PROSECUTION AGREEMENTS: A NEW UK TOOL
In the UK, significant changes are imminent as the much anticipated Deferred Prosecution Agreement (DPA) takes a step closer to implementation with the release of a Draft Code of Practice.
DPAs offer a radical departure from the UK’s traditional approach to corporate criminality and, in conjunction with the Bribery Act, represent a significant change in the UK’s regulatory landscape.
DPAs were introduced to UK jurisprudence to bring UK law more in alignment with US law and to assist in multi-jurisdictional cases involving economic crime – money laundering, fraud, bribery. We expect that DPAs will useful tools for prosecutors seeking to enforce the UK Bribery Act.
DPAs are likely to take effect from February 2014 and will be available to “designated prosecutors” in the UK – currently the Serious Fraud Office and Director of Public Prosecutions.
Find out more.
TACKLING THE REALITIES OF DUE DILIGENCE IN A GLOBAL SETTING
The Resource Guide to US FCPA promulgated by the DOJ and SEC emphasizes the need for appropriate due diligence and vetting before engaging third parties.
It details the need for companies to conduct risk-based due diligence in order to understand the qualifications and associations of prospective third-party partners and ensure they are not willingly forging alliances with partners who are likely to commit acts of corruption; and thus avoid subjecting themselves to possible liability under the FCPA as well as other anti-corruption laws. It all sounds pretty straightforward.
The reality however, is that for even the most conscientious of companies, real hurdles exist to conducting fulsome due diligence in a global setting.
Find out more about some of the practical issues surrounding this due diligence process.