Corruption - do companies understand FCPA enforcement exposure?

Ed Marsh | Apr 30, 2012

No company is innocent

"Show me the company and I'll find you the corruption" - modern day anti-corruption officials might seem to borrow a line from Stalin's dreaded chief of secret police Lavrenti Beria.

That's the reality of most of the newly invigorated and increasingly harmonized and enforced international anti-corruption regulations.  The reach is so extensive that indeed it is truly likely that every company has exposure.

And yet many companies remain naively ignorant of both the breadth of risk and severity of consequences of FCPA enforcement actions. 

Onerous provisions

The US FCPA (Foreign Corrupt Practices Act) and the UK Bribery Act of 2010 contain provisions which startle and alarm most companies.  These include:
  • exposure in jurisdiction of the law even if the violation occurred in a different jurisdiction (American companies which have business activities in the UK could be punished there for violations occurring in a completely unrelated market)
  • liability for actions of 3rd parties (if a company's agent engages in corrupt practices of their own accord, without any knowledge of the company)
  • responsibility to prevent corruption in addition to the obligation to refrain from acting corruptly
  • personal criminal liability for officers and directors
And yet most companies have the simple belief that if they simply refuse to pay bribes they are "safe."  That is dangerously naive.

Common and insidious situations

And that naiveté actually contributes to the sorts of situations that can trip companies up.  The majority of the investigations brought recently by the US DoJ into possible FCPA violations are focused on "facilitation payments" to customs officials.

Imagine the position of a company which has done "clean business" and secured an order, built and shipped the product.  Now with the L/C about to expire, the product is being held by customs based on specious assertions.  The company faces a huge loss (as the customs agent knows) and works feverishly to find a solution.  Suddenly the shipment clears and all seems fine....except that the local agent had actually made the requested payment to secure the release of the product from customs hold.

And companies in international business should suffer no illusions - corruption is endemic world wide.  It is accepted in many markets as evidenced by the open acknowledgment that lifestyles of government employees are predicated on supplementing meager salaries with bribes.

I have personally experienced markets where government officials print private residence address and telephone on the reverse side of business cards, and I recently sat in a meeting in an ASEAN country where a potential buyer explained to me AND THE US CONSULAR employee who accompanied me that the deal could certainly be struck - but only with "money under the table."  Perfect colloquial English and without any pretense at euphemism.

Good news

The good news is that companies can take a number of simple and inexpensive steps to achieve compliance and minimize their risks of being entangled in FCPA enforcement actions.  But it's simply not enough to have a corporate philosophy that "We don't pay bribes."

A formal compliance program involves written policies, periodic training of employees & 3rd parties, and clearly articulated expectations which are modeled and reinforced by leaders and managers.

Mitigating the risk of FCPA enforcement is feasible and affordable - but acknowledging the exposure is the critical first step which many companies avoid.

Ready to look at putting an appropriate program in place in your company?  Contact Consilium Global Business Advisors to discuss how we can help with practical and common sense approaches to this and other international business challenges.

Tired of trying to figure it all out as you go with a limited staff?  Download our free whitepaper on selecting an export consultant to understand what support options are available.

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