Russian Compliance Practitioners In Texas

by Thomas Fox
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https://jdsupra-html-images.s3-us-west-1.amazonaws.com/0297592b-b2ab-42c2-9d3c-f9ca7dd98fcc-cipe-logo.jpgYesterday I had the privilege of meeting a group of compliance practitioners from Russia who came to the United States to meet with US based compliance professionals and learn more about how the Foreign Corrupt Practices Act (FCPA) impacts how US companies do business overseas. The delegation was hosted by Washington-based Center for International Private Enterprise (CIPE), an affiliate of the US Chamber of Commerce.

The purpose for the visit was straightforward, to allow these Russian compliance specialists to understand more fully the obligations of US companies under the FCPA so that they, in turn, could educate Russian businesses which may want to do business with US companies. It is, as my colleague Jason Poblete often writes on his blog The DC Dispatches, a business approach to a legal problem. As this is Texas and the world famous Houston Rodeo is just beginning, we dined at lunch with some very excellent Bar-Be-Que. Meeting our Russian colleagues were some of Houston’s top in-house compliance officers and practitioners. While primarily drawn from the energy sector, there were representatives from public and private companies; multi-billion dollar companies down to entities with $100 million in annual sales; product manufacturers and service-oriented companies, some companies had larger compliance departments, down to one-man (compliance) bands

I learned quite a bit listening to the Houston based compliance specialists talk about the thing that was most important or significant when dealing with a third party. Their remarks were limited to 5 minutes so they could only talk about a few key points. By far the most important was to understand who they were doing business with in the third party. Not just the listed owners, officers, directors and key employees but who is the ultimate beneficial owner. It is because that understanding of ownership allows a determination to be made if there is a foreign government representative involved. While certainly this would raise a red flag, the Department of Justice (DOJ) Opinion Releases have shown that having foreign official ownership does not require a US company to decline to do business under all circumstances as the key is how is that relationship is managed.

A second point made was that if a Russian company had a compliance program in place and understood a US company’s obligations under the FCPA; it would clearly stand out as a market differentiator. So by having a program, training on it, having documentation of all of this a Russian company could stand out as a potential business partner of a US centric company, in a variety of manners such as an agent, sales representative, supplier, joint venture partner or even as a key customer.

Another Houston based compliance practitioner, whose company has more of a logistical focus, said that a key compliance indicator for his company is documentation. The more documentation that can be presented to support invoices, the more comfortable he can be that all assessed charges are legitimate and are levied with transparency.

The final topic was another point that the FCPA Guidance makes clear, which is not only do you need to assess your risks but you also need to manage your risk. Each Houston-based compliance officer discussed the risk profiles for their company and the FCPA risks that were presented to them. They each had a different focus for managing their attendant risk. It was a powerful way to view the clear import from the FCPA Guidance to assess your risk and then manage it.

One of the things that I found most fascinating were the lessons that I learned listening to my newfound Russian colleagues. While they may seem obvious when you think about some of these lessons. The first was regarding language. While all of our guests spoke English quite well, they provided a translator because the nuances of both compliance-speak and Texan would probably have been a bit too much for them to fully grasp. It made me understand that even with very good “English as a second language” speakers involved, it is far better to provide information and education in the native language. Clearly, when the FCPA Guidance suggested that a company’s Code of Conduct and its compliance training be in a subsidiary’s local language they were on to something important.

Another point was that the Russian compliance professionals innately understood that you need to look at several different factors on a company’s background in the performance of due diligence. One technique cited was the tendency of certain company owners to open and close several businesses, while running up huge debts and not paying them, thereby bankrupting not only their business but their unlucky suppliers. So there was a focus on company debt and length of time to pay suppliers that they believed was also a key factor in an appropriate due diligence investigation into a Russian company to determine if it was an acceptable business partner.

A final observation was the enthusiasm of the Russian compliance practitioners. Not only did they clearly understand that a company run ethically with good business practices was a better company; they also understood that Russian companies, who did business with US companies and were forced to have a FCPA compliance program, could help lead better business practices generally and more widely in Russia. In other words, they believed there is a market solution to help Russian companies do business ethically and that by requiring Russian companies to abide by anti-corruption laws like the FCPA and UK Bribery Act, it can help lead Russian businesses to more of an international position.

Our lunch ended and with much BBQ digested and we all said our good-byes. I hope that our Russian guests found us to be as gracious hosts as we found them to be guests. I also want to salute CIPE for organizing this trip and a shout out to my friends at the US Chamber of Commerce for putting together an NGO to help deliver business solutions to legal (and ethical) problems. As Mike Volkov wrote yesterday, compliance is much easier if you simply do not engage in bribery and corruption. CIPE helps non-US businesses and persons to follow that proscription and to help bring a more international effort to the fight against bribery and corruption.

http://tfoxlaw.wordpress.com/2014/02/28/russian-compliance-practitioners-in-texas/

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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