United States: What Every Multinational Company Should Know About … Anti-Corruption

Welcome to Foley's International Trade, Enforcement & Compliance Regulatory Series

The international trade and regulatory environment never has been more difficult for multinational corporations to navigate. For companies that operate, source from, or sell goods, software, or services across borders, legal complexities abound. International trade wars, rapidly changing export control and economic sanctions requirements, increasingly stringent anticorruption requirements, and many other international trade and regulatory issues present existential risks to most multinational organizations.

To help businesses that conduct international operations make sense of the myriad ways in which the U.S. and other governments regulate global transactions and enforce laws applicable to cross-border economic relationships, Foley's International Government Enforcement Defense & Investigations and Manufacturing Teams have come together to help multinational organizations manage their international trade and regulatory issues wherever they arise. We will be providing quick-hit insights into identifying, managing, and mitigating risks that confront multinational corporations every day, with practical advice going out from our inboxes to yours. Each email will highlight enforcement and compliance topics of relevance to all multinational corporations, with each email also drilling down into a select topic of concern to multinational organizations.

If you would like to be added to our email list, click here to register.

What are the Anti-Corruption Requirements?

• The U.S. Foreign Corrupt Practices Act (FCPA) prohibits companies, their subsidiaries, and their officers, directors, employees, and agents from corruptly offering anything of value to a foreign official to obtain or retain business or to secure any improper business advantage. The FCPA is enforced by two U.S. government agencies: the U.S. Department of Justice (DOJ) and the U.S. Securities & Exchange Commission (SEC).
• The FCPA's jurisdictional scope is broad, covering U.S. persons (individuals and companies); any issuer with stock traded on U.S. stock exchanges or with securities subject to SEC filing requirements; the officers, directors, employees, and agents of the above; and any person or entity violating the FCPA within the U.S. Issuers also are subject to the FCPA's accounting and internal controls provision, which requires issuers to keep accurate books and records in sufficient detail to reflect the true nature of transactions.
• Beyond the FCPA, multinational companies are subject to anti-corruption laws in numerous other countries, which may impose even more stringent anticorruption requirements, including for commercial bribery to private persons.

Why Are Anti-Corruption Regulations Important to My Company?

• Anticorruption violations can have significant direct consequences, including criminal convictions, fines in the tens or hundreds of millions of dollars, disgorgement of profits, and civil penalties.
• Investigation costs often exceed the penalty amounts. In addition to the reputational harm, corruption-related violations can lead to parallel investigations and enforcement actions in multiple countries, shareholder suits against officers and directors, breach of loan covenants and other contracts, and debarment or blacklisting proceedings.

What Areas Present Anti-Corruption Risks for My Company?

• Ineffective oversight of third parties interacting with government officials is a major driver of anti-corruption enforcement actions. Companies that employ consultants, agents, and distributors; that rely on a distribution or franchise model; or that maintain non-U.S. joint ventures are at especially high risk, especially if they engage third parties to obtain government permits, licenses, or otherwise have frequent contact with government officials.
• The presence of many State-Owned Enterprises (SOEs) in China and developing countries raises FCPA concerns, as even SOEs operating as ordinary commercial entities trigger FCPA requirements, as every employee is treated as a government official under the FCPA.
• In the M&A space, the DOJ and SEC have been aggressively asserting claims against acquiring companies, often using theories of successor liability, for pre-merger conduct of their targets that violated the FCPA.
• The DOJ and SEC have emphasized the need to conduct regular anti-corruption compliance risk assessments, particularly after events that could significantly impact business operations such as the global COVID-19 pandemic, entrance into new markets, or a corporate acquisition. Such events generally introduce new, expanded, or revised internal controls; increased governmental interactions; new employees; unique jurisdictional requirements; or new business partners and third-party relationships, each of which may present novel or heightened anti-corruption risks.
• Global cooperation and coordination between U.S. and foreign enforcement agencies has increased appreciably, with countries often sharing information (as well as simultaneously imposing fines and penalties).

What Are the Most Common Anti-Corruption Errors at Typical Multinational Companies?

• The DOJ and SEC expect companies to maintain compliance policies, internal controls, and training programs tailored to their anti-corruption risk profile.
• FCPA best practice guidelines published by the DOJ and the SEC set a baseline for corporate conduct, raising the stakes for multinational companies without adequate compliance programs. Moreover, the increased emphasis on know-your-business-partner initiatives has resulted in lenders and customers looking more closely at the steps taken by their business partners to mitigate anti-corruption risks.
• The most common shortcomings we see are: (1) failure to conduct periodic risk assessments that specifically address anti-corruption issues based on the geographies in which a company operates and how the company goes to market; (2) failure to conduct appropriately tailored due diligence on high-, medium-, and low-risk third parties and business partners; (3) failure to monitor third-party relationships on an ongoing basis; (4) failure to conduct adequate anti-corruption due diligence in connection with M&A activity; (5) failure to implement, communicate, and monitor ethics hotlines; (6) failure to conduct targeted red-flag training for key business functions; (7) failure to conduct anti-corruption audits and compliance checks; (8) failure to incorporate appropriately tailored anti-corruption provisions in contracts with third parties; and (9) failure to monitor and periodically audit gifts and entertainment spending, particularly with respect to business courtesies provided to government officials and employees of state-owned enterprises.

How Can Foley Help Me Minimize Anti-Corruption Risks at My Company?

The U.S. Government has endorsed a risk-based approach to anti-corruption compliance. This means the best way to combat the prospect of large penalties is to examine carefully the organization's risk profile based on how and where it does business. By identifying high-risk conduct, the organization can put in place reasonable but effective compliance measures to minimize the risk of violations.

Foley provides clients with practical guidance in implementing and improving compliance programs, which are tailored to the unique risks face by each company. Our emphasis on compliance and avoiding issues before they attract the attention of regulators includes:

• Counseling. Counseling companies to understand how anti-corruption regulations apply to their multinational operations.
• Risk Assessments. Working with companies to conduct anti-bribery and anti-corruption risk assessments.
• Compliance. Preparing tailored compliance solutions, including third-party risk management.
• Training. Conducting targeted training for U.S. and non-U.S. personnel.
• Due Diligence. Working with companies to conduct and identify procedures for tailored due diligence for third-party onboarding and monitoring and for corporate acquisitions, expansions, and joint ventures, as well as helping companies satisfy the increasingly rigorous know-your-customer and know-your-supplier due diligence expectations of the U.S. Government.
• Investigations. Our international anti-corruption attorneys routinely conduct internal investigations and enforcement proceedings before the DOJ and SEC. Our reach is truly global, having handled anti-corruption matters arising out of more than 80 countries around the world, with particularly deep experience in India, China, and Latin America. Foley is also a founding member of the Concilium Compliance, Investigations, and Defense Network, an international association of trusted lawyers and law firms that specialize in anti-corruption defense, internal investigations, and compliance.

How Can Foley Help Me Deal with Anti-Corruption Issues?

Fill out our risk-assessment questionnaire and return it, and our anti-corruption attorneys can help your organization assess its bribery-related risk. Click here to take the survey. Our anti-corruption attorneys are well versed in corruption-related issues as they arise around the world. We help multinational companies that operate in, sell to, or import from overseas manage their corruption-related risk.

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.