FCPA Compliance Program

FCPA
FCPA

FCPA Compliance Program

Foreign Corrupt Practices Act Compliance Program for the USA Companies Doing Business Overseas


The Foreign Corrupt Practices Act of 1977 (FCPA) (15 U.S.C. § 78dd-1, et seq.) is a United States federal law known primarily for two of its main provisions:

  • addresses accounting transparency requirements under the Securities Exchange Act of 1934; and
  • concerning bribery of foreign officials.

Provisions and scope of FCPA

The idea of Foreign Corrupt Practices Act (FCPA) is to make it illegal for companies and their supervisors to influence anyone with any personal payments or rewards.

The FCPA applies to any person who has a certain degree of connection to the United States and engages in foreign corrupt practices. The Act also applies to any act by U.S. businesses, foreign corporations trading securities in the U.S., American nationals, citizens, and residents acting in furtherance of a foreign corrupt practice whether or not they are physically present in the U.S. This is considered the nationality principle of the act. Whenever businesses decide to follow the unethical road, there are consequences including high financial penalties. Any individuals that are involved in those activities may face prison time.

This act was passed to make it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. In the case of foreign natural and legal persons, the Act covers their deeds if they are in the U.S. at the time of the corrupt conduct. This is considered the protective principle of the act. Further, the Act governs not only payments to foreign officials, candidates, and parties, but any other recipient if part of the bribe is ultimately attributable to a foreign official, candidate, or party. These payments are not restricted to monetary forms and may include anything of value. This is considered the territoriality principle of the act.

The DOJ and SEC do not formulate requirements regarding compliance programs. When evaluating compliance programs, inquiries relate to three questions:

  1. Is the company’s FCPA compliance program well designed?
  2. Is the compliance program applied in good faith?
  3. Does the complaince program work?

Each company may have different compliance needs that depend on their size or risk exposure, so there is no compliance program that suits every business.

However, in order to design an effective compliance program, the Resource Guide to the FCPA recommends that a program include the following policies and procedures:


Tone at the Top

A commitment from senior management and a clearly articulated policy against corruption.

Code of Conduct & Compliance Policies

The code of conduct is the foundation of an effective compliance program. Policies and procedures detailing proper internal controls, auditing practices, documentation policies and disciplinary measures should be in place.

Oversight, Autonomy and Resources

Individuals in charge of oversight should be autonomous from management and should have sufficient resources to ensure the program is implemented correctly.

Risk Assessment

Companies should analyze and address the specific risks they face.

Training

Companies should take the appropriate steps to ensure that the policies and procedures have been communicated throughout the organization.

Incentives and Disciplinary Measures

Clear disciplinary procedures should be in place and the adherence to compliance policies and procedures should be incentivised throughout the company.

Third-Party Due Diligence & Payments

Third-parties should be assessed regularly and should be informed of the company’s compliance program and code of conduct.

Reporting

Employees should be able to report violations without fear of retaliation through a whistle-blowing mechanism based on confidentiality. The compliance program and internal controls should be updated after an internal investigation.

Testing and Review

As a company’s business and environment in which it operates changes over time, a good compliance program should be reviewed and constantly evolve over time.


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