China: Spotlight On The Enforcement Of The U.S. Foreign Corrupt Practices Act: 2018 And Beyond

Last Updated: 5 April 2019
Article by Peter C. Pang

The Foreign Corrupt Practices Act (the "FCPA") is a U.S. federal statute that requires companies to observe certain accounting transparency standards and prohibits individuals and companies from bribing foreign officials. Because of its international reach, it can be used to impose civil and criminal sanctions against both companies and individuals operating anywhere in the world, regardless of nationality, as long as a sufficient connection with the United States is shown.

The FCPA is enforced by the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC). 2018 was a record-breaking year for FCPA enforcement, as 16 companies paid a total of $2.89 billion in penalties. The biggest loser was Brazilian multinational Petrobras, which paid $1.78 billion in penalties, nearly as much as the amount paid by all companies in 2017. Several new trends in FCPA enforcement appeared in 2018 as detailed below.

Enforcement Authorities Take Aim at the "Big Boys"

Both the SEC and the DOJ have announced their intention to focus more on high profile cases involving large penalties. Although the Petrobras case was the centerpiece of 2018's enforcement efforts, it represents the tip of the iceberg – 70 percent of the all-time highest value FCPA settlements have taken place since 2016. High-profile cases are expected to continue to make up the majority of FCPA penalties, at least in terms of cumulative dollar value.

International Enforcement Cooperation Is Becoming the Norm Rather Than the Exception

It wasn't all that long ago when global efforts to combat corruption were relatively isolated and fragmented, with little cooperation between various national entities responsible for enforcing anti-corruption laws. This state of affairs, of course, worked to the advantage of multinational companies whose operations were scattered across the globe. But globalization has now caught up with international anti-corruption enforcement.

In 2018, the SEC and the DOJ cooperated extensively with Brazilian authorities on the Petrobras case, and the DOJ cooperated with French authorities on the Société Général S.A. case. These two agencies have also built strong cooperative relationships with enforcement authorities in the United Kingdom and the Netherlands as well. This uptick in international cooperation illustrates how international anti-corruption enforcement is becoming more robust throughout the world.

Chinese Companies Are Now in the Bull's Eye

FCPA enforcement against Chinese companies has long been highly charged with national security issues. In 2018, the DOJ launched its "China Initiative," which specifically targets Chinese companies. The now-famous detention of Huawei executive Meng Wanzhou followed shortly thereafter. Two highly politicized concerns stand at the forefront of this initiative: national security threats generated by new technology (cell phones, for example) and trade secret theft.

China's new International Criminal Judicial Assistance Law (ICJA) could turn out to be a significant countermeasure against the China Initiative – in part because it can be interpreted to require Chinese companies to obtain permission from the PRC government before providing evidence in criminal proceedings held outside of China .

DOJ Announces Corporation-Friendly Policy Changes

The DOJ commenced three major policy initiatives in 2018:

  • It issued guidelines aimed at preventing the imposition of multiple fines for the same offense when a company is being investigated by more than one agency.
  • It issued guidelines on monitorships in which a company submits to external monitoring and burdensome reporting obligations in order to ensure its compliance with the FCPA. The new guidelines are expected to narrow the scope of monitorships and allow target companies more input into the selection of monitors.
  • It revised the Yates Memorandum, which provides guidelines detailing how companies reporting their own employees for misconduct can receive credit for cooperating with the DOJ. These revisions are expected to reduce the burden of compliance with DOJ investigations and to simplify the process of qualifying for cooperation credit.

All of these initiatives are thought to be corporation-friendly, and they are consistent with prior expectations regarding the Trump administration's general posture towards FCPA enforcement.

United States v. Hoskins Limits FCPA Enforcement Jurisdiction

The reach of the FCPA is broad, and it has been widely criticized both at home and abroad for its extraterritorial application of US law. In United States v. Hoskins, the federal Second Circuit Court of Appeals limited FCPA enforcement against non-US nationals to individuals whose conduct occurred in the United States or who acted as employees or agents of US companies.

Previously, although individuals who fell outside the scope of this jurisdiction could not be charged with a substantive FCPA offense, they were still pursued by the SEC or the DOJ under federal conspiracy statutes (such as RICO) instead. The Hoskins court, however, ruled that defendants who cannot be charged with substantive offenses cannot be charged under federal conspiracy statutes either.

Look for (Mostly) More of the Same in 2019

Most of the FCPA trends established in 2018 look set to continue throughout 2019:

  • The DOJ and the SEC will probably continue to focus on targeting high-profile corporate defendants with large fines. This emphasis might come at the expense of enforcement actions against lower-priority targets.
  • International cooperation is likely to expand in 2019, particularly in the realm of information-sharing among the various national anti-corruption agencies. US authorities may be more willing to yield to foreign regulators when circumstances indicate that US jurisdiction over a case would be inappropriate.
  • FCPA enforcement authorities are likely to offer significant incentives (in terms of lenient treatment) to companies that self-disclose and cooperate with investigations.
  • In light of the Hoskins decision, the DOJ will likely rely on laws other than the FCPA to target corruption, especially where the targets are individuals rather than companies. Money laundering and wire fraud statutes, which enjoy extraterritorial reaches that exceeds even the FCPA, are likely to be seen as particularly tempting legal weapons.

The fate of the Trump administration's China Initiative is the only real wild card in the deck. Due to its highly charged political nature, it is difficult to predict how US internal politics and diplomatic friction between the US and China will affect the aggressiveness of the DOJ. No matter what happens in 2019, however, it seems all but certain that the SEC and the DOJ will continue to prioritize FCPA enforcement far more than they used to.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions