Conducting Corporate Investigations for FCPA Compliance

  • Former Federal Agents
  • 100 Years of Combined Experience
  • Investigations, Compliance & Defense
Chris Quick

Former Special
Agent (FBI & IRS)

Roger Bach

Former Special
Agent (DOJ-OIG & DEA)

Timothy Allen

Former Special Agent
(U.S. Secret Service & DOJ-OIG)

Ray Yuen

Former Special
Agent (FBI)

Michael S. Koslow

Former Special
Agent (DOD & OIG)

Tim Allen

FCPA Compliance Team Lead – Timothy E. Allen | Former Special Agent (U.S. Secret Service & DOJ-OIG)

All companies, both domestic and foreign, need to take steps to stay in compliance with the Foreign Corrupt Practices Act, or FCPA. This wide-reaching federal law forbids companies from using bribes with foreign officials in order to obtain or retain business. The concept of “foreign official,” however, is extremely broad and includes people who may not outwardly appear to be a part of a foreign government. This makes compliance difficult for companies that are not exceptionally vigilant.

The internal auditors at Corporate Investigation Consulting provide FCPA compliance services, including FCPA audits. These are an essential component of the compliance mechanisms that are often necessary for keeping companies out of the crosshairs of the federal law enforcement agencies that conduct FCPA investigations.

The Wide Reach of the Foreign Corrupt Practices Act

The FCPA (15 U.S.C. § 78dd-1 et seq.) is a fairly straightforward federal law that has some extremely broad consequences that are often underappreciated. Companies that do not understand how far it reaches can find themselves accused of violating it. These allegations carry substantial penalties.

Companies violate the FCPA if they bribe “foreign officials.” This sounds like it would only apply to high-level dignitaries and politicians of other countries. To the surprise of many, though, there is no requirement that the official be of rank. They just have to be an agent or employee of a foreign government. This includes the obvious, such as:

  • Foreign presidents or prime ministers
  • Members of a royal family
  • Foreign politicians and candidates for office

However, it also applies to people far lower down on the chain of command, like:

  • Employees at foreign public or state-owned companies
  • Healthcare professionals in countries that have universal, state-operated healthcare systems
  • Administrators or faculty members at state-run schools or universities
  • Government advisors

Worse, the FCPA forbids the corrupt payment of something of value to these foreign officials, even if they are hidden from the company’s view. It is illegal to directly offer these officials something of value for a business opportunity. It is also illegal to offer the bribe to an intermediary, if you know or should have known that the bribe would then be forwarded on to the official.

Put our highly experienced team on your side
Roger Bach

Former Special Agent (OIG)

Timothy E. Allen

Former Senior Special Agent U.S. Secret Service

Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Maura Kelley

Former Special Agent (FBI)

Ray Yuen

Former Supervisory Special Agent (FBI)

Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Marquis D. Pickett

Special Agent U.S. Secret Service (ret.)

The Steep Penalties of Violating the FCPA

Corruptly providing a payment to a foreign official can lead to an investigation by the U.S. Securities and Exchange Commission (SEC) or the Department of Justice (DOJ). This can escalate into either a criminal or a civil charge, and both financial penalties and prison time for the individuals involved in the transaction.

Just the allegation of a violation of the FCPA is a serious event. An accusation that a corporation has bribed someone in order to corruptly procure business overseas is certain to generate bad press and tarnish the company’s brand. This alone can lead to millions of dollars in lost revenue that often comes downstream of a battered reputation.

However, a conviction for each FCPA violation by an individual person carries up to 5 years in jail, $10,000 in civil penalties, and $100,000 in criminal fines. For corporate entities, the criminal fines can increase to two million dollars for each violation, though prison time is obviously off the table given the corporate defendant. The SEC can increase these financial penalties to match the financial gain from the corrupt payments.

Worse, the SEC and DOJ have stepped up their enforcement efforts and gone to great lengths to enhance the punishments they impose against violators. In one recent settlement agreement involving a company whose subsidiary was accused of repeatedly bribing officials in Peru, the SEC imposed a $10 million fine in large part because the company never audited its FCPA controls.

An Overview of FCPA Compliance

Given the steep repercussions of violating the FCPA, complying with the law is critical. This involves:

  • Establishing internal policies that forbid corrupt practices with foreign officials
  • Implementing employee training on those policies
  • Creating internal controls to prevent employees from offering illicit bribes and to detect them if and when they are made
  • Incentivizing the internal disclosure of suspected FCPA violations
  • Ensuring that all of the necessary paperwork and records are being kept that would reveal a potential violation
  • Reviewing those records to ensure that there are no signs of an FCPA violation
  • Testing the internal controls to see if they are actually performing the way they should

These last two aspects of FCPA compliance are the focus of internal FCPA auditing.

The Role of Internal Auditing in FCPA Compliance

Out of all of the corporate compliance obligations that companies have, FCPA compliance probably needs ongoing review and auditing the most. This is because the FCPA deals with international trade, which is affected by global politics and regional upheaval. The parties involved in a foreign transaction can change, foreign officials can enter or leave the venture, or business partners can become intermediaries for hidden officials and their agendas. All of these potentials for change can alter what was once a legitimate and legal foreign transaction into one that violates the FCPA, and all without the corporation knowing about it.

As a result, FCPA audits are a big part of the compliance scheme. These audits generally progress through the following steps:

  1. Determining the scope of the audit
  2. Reviewing the applicable and appropriate compliance protocols
  3. Selecting the audit team
  4. Identifying all of the relevant sources of information covered by the audit
  5. Implementing document preservation rules to ensure nothing gets lost or destroyed
  6. Conducting interviews and reviewing documentary information
  7. Following up on potential FCPA violations
  8. Taking corrective action on transactions that violate the FCPA
  9. Preserving a record of the audit

Each one of these steps is sensitive and has to be performed carefully and thoroughly to be effective.

Some Frequently Asked Questions (FAQs) About the FCPA, Internal FCPA Audits, and Corporate Investigation Consulting

Should FCPA Violations Be Self-Reported?

The U.S. Department of Justice insists that corporations who find FCPA violations – whether during an audit or in the normal course of business – should voluntarily report them to the agency for investigation. However, self-reporting does not guarantee complete immunity from the violation, and recent enforcement actions have made it abundantly clear that law enforcement does not consider self-reporting to be a strong factor in leniency. The decisions of whether, when, and how to report a potential FCPA violation are serious ones that should be made with experienced legal advice.

What Do Internal Auditors Look for During an FCPA Audit?

Internal auditors performing an FCPA self-audit are looking for signs of corrupt business deals with foreign officials from within the company. They closely examine foreign business transactions, and the paperwork associated with those transactions, for indications that something is not right or for signs of illegitimacy. This can take a huge variety of forms, so it is very important to have the right auditors performing the inspection. Inexperienced investigators are likely to overlook signs of corruption or miss red flags.

Once the audit is complete, the auditors will inform relevant parties of the findings and make recommendations on how to proceed.

When is a Good Time to Conduct an FCPA Audit?

FCPA audits should be a regular event, particularly for large companies that have lots of international business going on. However, two events should spur these corporations to take immediate action and conduct an FCPA audit:

  1. Signs of corruption have been discovered within the company, whether by an internal report or in the normal course of business
  2. The company does business in a part of the world that is experiencing upheaval and lots of rapid change

In either of these cases, it is essential to get auditors on the ground right away to look into the issue and see if there are any threats to the company.

What Sets Corporate Investigation Consulting Apart from Other Auditing Firms?

The main thing that sets us apart from our competition is our staff of investigators and auditors. Many of them come from law enforcement backgrounds. Lots of them worked prior careers within the SEC or the DOJ, investigating potential FCPA violations and helping prosecutors enforce the law against wrongdoers. Their experience on the enforcement side of the FCPA gives them invaluable insight into FCPA compliance and internal auditing. They know what investigators will look for, how they will react if they find it, and how quickly things can escalate. The clients that have come to us for FCPA compliance and auditing services have benefited from this insider information, helping them take informed and wise decisions about how to proceed.

FCPA Auditors at Corporate Investigation Consulting

Conducting an effective FCPA internal audit is absolutely critical, given the increased attention that the DOJ and the SEC have been putting on enforcement actions and the excessive fines that they have been imposing. Additionally, given the recent global turmoil and the armed conflict that it has created, there is no better time for reviewing your company’s foreign business ventures to ensure that they still comply with the terms of the FCPA.

The internal auditing professionals at Corporate Investigation Consulting have helped numerous international corporations review their internal controls for compliance with the FCPA. With our expert guidance and experienced advice and auditing techniques, these companies have taken the steps necessary to continue to insulate themselves from allegations of wrongdoing under the FCPA.

Call us at (866) 352-9324 or contact us online to join their ranks.

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