4 compliance lessons learned from recent FCPA enforcement actions 

by Josephine McCann August 1, 2019

Two companies recently resolved Foreign Corrupt Practices Act (FCPA) enforcement actions, agreeing to pay a combined total of $364 million to the U.S. government. Each case highlights the shortcomings of each company’s compliance policies and procedures. 

Below is a summary of the types of violations found in each case – and, more importantly, what your company can do to stay ahead of FCPA enforcement actions. 

Failing to perform due diligence on third-parties 

A large multinational retailer faced FCPA enforcement actions after failing to conduct due diligence on a foreign third party, who then made improper payments to government inspectors. In addition, the retailer failed to perform sufficient anti-corruption due diligence on third-party intermediaries who interacted with foreign officials; didn’t have sufficient internal accounting controls related to third-party payments (such as proof that the third-party actually performed services or that contracts had anti-corruption clauses), and didn’t have sufficient policies or procedures concerning gifts, travel, entertainment and donations. 

It was the U.S. government’s determination that the retailer profited from rapid international expansion, but failed to take necessary steps to prevent corruption. The retailer valued their growth and cost-cutting procedures over compliance practices and repeatedly failed to implement internal controls. As a result, they are required to pay over $282 million in fines. 

Bribing foreign officials with jobs and favors 

In the second enforcement action, a global oil and gas company was found guilty of using  “various consultants and intermediaries” to pay bribes to state-owned or state-controlled companies and foreign political parties. The U.S. government also determined that the company engaged in nepotism by hiring children of alleged foreign officials as a favor to foreign officials. They were fined over $82 million to resolve the matter. 

Four questions every compliance professional should ask themselves

Based on these two recent FCPA enforcement actions, compliance professionals should ask themselves the following four questions about their own organizations:

  1. Is compliance centralized within your organization (or do foreign subsidiaries have discretion regarding various aspects of anti-corruption compliance)? 
  2. What type of due diligence is performed on third-parties used by your organization (whether a subsidiary, business unit, or joint venture partner)?
  3. Does your organization have written policies and procedures that are effectively communicated throughout the organization regarding gifts, travel, entertainment, and donations?
  4. What policies and procedures does your organization have regarding employment opportunities and internships? Does your human resources team play a meaningful role in compliance?

Spend-related regulatory violations can come in a variety of forms. To find out more about how your organization can stay in compliance with FCPA regulations, download our compliance checklist, 15 Ways to Weed the Regulatory Violations out of Your Spend.  

Josephine McCann

Josephine is a Product Marketing Manager at AppZen, where she loves crafting content and telling interesting stories.