Globally, enforcement has seen an upward trend in recent times, particularly in fraud, bribery and corruption related cases. Developed markets with strict regulations and enforcement are leading the way here, endorsing cross border collaboration and the benefits of voluntary disclosures to deter penalties. Driven by the US Foreign Corrupt Practices Act (FCPA), many companies have chosen to self-report violations to the Department of Justice (DOJ) or Securities Exchange Commission (SEC). Organizations as well as compliance professionals are even more cognizant that unethical practices are likely to come to light in today’s world of increased scrutiny. This can also result in significant repercussions from a financial as well as reputational standpoint. Thus, they are proactively going for self-disclosure to minimize costs and the impact on business.
A positive impact with the FCPA pilot program
In 2016 the DOJ introduced a pilot program to reward businesses voluntarily disclosing misconduct, providing full co-operation, and timely and appropriate remediation against FCPA matters. The pilot program continued for more than a year and showcased improvements in the number of voluntary disclosures. In a recent conference in November 2017, Deputy Attorney General Rosenstein applauded the success of the program and discussed how it has helped make good progress in combating corporate crime, but there were still areas for improvement.
Rosenstein also announced the new FCPA Corporate Enforcement Policy, making the pilot program permanent with some revisions which continue to encourage voluntary disclosures of potential FCPA violations. It provides credit for all the three parameters; voluntary self-disclosure, full co-operation, and timely and appropriate remediation in FCPA matters. This covers a 50% reduction off the low end of the USSG (U.S. sentencing guidelines) fine range as against 25% in case of non-disclosure but full co-operation, and timely and appropriate remediation.
FCPA Corporate Enforcement Policy and pilot program – what is the difference?
The new policy largely is an extension of the FCPA pilot program and consolidates previously issued guidance on the topics. However, one of the key differences between the revised policy and the pilot program is the presumption of declination. This means, if companies comply with all three parameters, they are presumed to be entitled to a declination, unless there are aggravating circumstances related to nature and seriousness of the offence. In the earlier program, under these above circumstances, the DOJ would ‘consider’ a declination. It is important to note that while this policy is not binding on the DOJ, however, it serves to provide insight and guidance on the regulator’s perspective and likely course of action. The factors considered to assess credit for each of these include –
Individual accountability will remain in crosshairs
Individual FCPA prosecutions has been rising since the 2015 Yates Memo and are expected to continue this year as well. The prosecution of 19 individuals, having either pleaded guilty or been convicted of FCPA related cases in 2017 reinforces commitment toward holding individuals liable for criminal offences.
How can this help organizations?
- Recognize benefits of compliance and cooperation as against costs of non-compliance
- Develop ethical procedures and drive transparency both at an individual level as well as at an organisational level
- Re-emphasizes the need for having an effective compliance program in place. This is line with the DOJ guidance issued in February 2017 on “Evaluation of Corporate Compliance Programs”.
- Some of the key aspects to consider in this are –
- Authority, independence and reporting of the compliance function
- Ensuring availability of adequate and appropriate compliance resources and personnel
- Performing monitoring of third parties engaged by the organization
- Re-assessing adequacy of compliance procedures on a timely basis
- Harnessing technology to enable compliance procedure such as data analytics to identify red flags or compliance tools for employees and third parties
This statement fits appropriately in this scenario. The violators should admit their mistakes – admitting to FCPA misconducts, smart enough to profit from it – they should grab a chance to admit it and pay a lower penalty than get caught later and face harsh consequences and be strong enough to correct them – incorporate necessary remediation procedures and policies to avoid the repetition of the violations.