This is part 3 of a five-part series with Tom Fox and the FCPA Compliance Report on what to expect concerning regulatory and enforcement issues with the incoming Biden administration.
What can companies expect as priorities from new administration around anti-bribery and anti-corruption (ABC) enforcement?
Foreign Corrupt Practices Act (FCPA) Enforcement
Last year was a record year in Foreign Corrupt Practices Act (FCPA) penalties, with the largest international anti-corruption fine ever in the form of the Airbus SE enforcement action. Additionally, the $6 billion+ in FCPA fines and penalties levied in 2020 was more than double the amount for the prior year. However, cumulatively, enforcement actions were down in 2020 from 2019. While this could be just a one-year anomaly due to many companies trying to settle or otherwise come to a deal with the departing administration, it is of note that there was not an upward trend in the number of new FCPA investigations initiated under Trump. However, it is believed that the Department of Justice (DOJ) will move to fill up its pipeline of cases.
Securities and Exchange Commission Enforcement
With the change in administration, companies should expect that leading regulators, such as the Securities and Exchange Commission (SEC), are going to show a very strong hand in continuing to enforce corporate and financial fraud. Prior Democratic administrations have dealt with the aftermath of economic downturns with a very distinct pattern and focus on the pursuit of corporate and financial fraud.
International ABC Enforcement
Over the last five years or so, there has been unprecedented international cooperation between law enforcement authorities on complex cross-border corruption and fraud investigations. The UK, Switzerland, Israel, and Brazil have certainly set the standard for this type of international collaboration. Conversely, Transparency International (TI) recently published a survey that found that more than half of the G20 countries are actually not actively investigating or sanctioning companies for paying bribes abroad. China, Japan, the Netherlands, South Korea, Hong Kong, Canada, India, and Mexico have been highlighted as the biggest global exporters with the worst track record.
What should compliance professionals consider in light of these 2021 realities? A robust compliance program and a robust risk management framework is a must nowadays as transacting across borders is the norm for most companies. It has become ever more complex for companies that have operations across different countries. This means stress testing your existing compliance program to ensure it is up to date with the evolving regulations in the different countries where you operate or trade, or where you have a presence. Regular enhancements to that program are also essential.
In addition, training has to cascade down through the organization in a very systematic manner. A compliance function should have knowledgeable and experienced risk advisory resources available to it, together with legal and investigative personnel and resources. Companies should formulate response plans that allow them to act fast when facing an issue or when mitigating an anticipated risk.
This training should extend to decisions regarding whether to self-disclose in a truly international situation where a company may have to disclose to multiple investigative bodies. A company must begin with a group of legal advisors who not only are very fluent with the regulation, but also have experience with regulators in different countries. This is because a self-disclosure is a coordinated effort in those multiple jurisdictions. The decision will come down to evaluating the facts, in light of the regulations in each one of the jurisdictions, and then charting out the best course of action based on prior experience.
To listen to the next episode in the series, please click here.
