Financial Institution Liability under the FCPA

As was recently reported in the FCPA Blog, the Securities and Exchange Commission (SEC) is now investigating “whether bank and private equity firms violated the [FCPA] in their dealings with sovereign wealth funds. A WSJ article noted that banks, such as Citigroup, and private equity firms, such as Blackstone Group Ltd., had received letters from the SEC requesting that they retain documents relating to such activities. At this point, the SEC letters did not state any specific allegations of bribery but indicated that such investigation was in “the early stages”.

In in the Q4 2010 issue, of Ethisphere Magazine, in an article entitled, “FCPA and UK Bribery Act Risks Facing Financial Institutions,” authors Alan Brudner, Palmina Fava and Mor Wetzler, [all attorneys at Paul, Hastings] explored some of the sources of liability for banks under the FCPA and UK Bribery Act. The authors began by noting that financial institutions face multiple anti-money laundering regulations in multiple jurisdictions. Under these various regulations, financial institutions are required to identify customers and the sources of funds. These requirements, coupled with the FCPA best practice of heightened scrutiny of transactions involving high risk countries, led the authors to opine that financial institutions may face liability under the FCPA and other anti-corruption legislation such as the UK Bribery Act.