AppZen Use Cases

FCPA and anti-bribery

If you aren’t doing a thorough review of all suppliers prior to onboarding and all spend prior to disbursement, you may have regulatory violations lurking in your payments.

Anti-bribery and corruption and your spend

You may have a best-in-class system for procuring products and services as well as approving invoices, p-cards, and expenses, but if you aren’t doing a thorough review of all suppliers prior to onboarding and all spend prior to disbursement, you may have regulatory violations lurking in your payments. This is especially urgent for global organizations that do business abroad or have acquired or built foreign divisions. One of the most critical concerns for enterprises today is the regulatory landscape around anti-bribery and corruption.

Anti-bribery and corruption regulations

Many of the world’s most powerful countries have either enacted legislation or participated in global consortia to articulate global standards for business ethics and hold businesses and people to account for bribes and corruption in foreign countries. Some examples of anti-bribery and corruption regulations around the world include the Foreign Corrupt Practices Act (FCPA) in the US, the Anti-bribery and Corruption Act in the UK, the Corruption of Foreign Public Officials Act in Canada, and the Organised Crime and Anti-Corruption Bill in New Zealand. They have also taken part in multilateral agreements and consortia to combat bribery and corruption, such as the such as the Organisation for Economic Cooperation and Development (OECD) Anti-bribery Convention, the African Union African Continental Free Trade Agreement (ACFTA), and the United Nations Convention Against Corruption (UNCAC).

$88M

is the cost of the average FCPA penalty, according to Stanford Law School

Key use cases

Audit 100 percent of spend prior to payment

Review or audit all contracts, payables, and expenses before you pay a cent. Because AI is automated and real time, you can perform all of the regulatory checks and review all spend for FCPA violations and pay suppliers and employees on time.

Understand documents

Extract and understand key information like dates, amounts, and spend categories from unstructured documents such as contracts, invoices, and receipts. These data points can serve as powerful clues in understanding whether payments are legitimate, expected, and warranted or inflated or otherwise risky.

Enrich with intelligence

Enrich all of the information surrounding a spend transaction with intelligence from business systems and external sources. AI gives you the visibility you need to validate spend and look up people and entities in regulatory sources prior to payment.

Assess and refine risk

Use AI to assess risk consistently. Refine the way you evaluate risk based on new data and user feedback over time. This lets you flag bribes and other violations prior to payment.

Streamline process

Automate workflows, remove extraneous steps, and arm reviewers and compliance professionals with the information they need to understand whether a spend transaction complies with regulation or not. Streamlining your review process lets you review all spend in real time, at scale.

What is the Foreign Corrupt Practices Act (FCPA)?

The Foreign Corrupt Practices Act (FCPA) is intended to combat publicly-traded companies’ bribery of foreign public officials in connection with international business. It applies to people and either US businesses or foreign corporations trading securities in the US, whether or not they are physically present in the country, and carries both civil and criminal penalties including fines and prison time. The law defines “bribe” broadly, indicating it can be any “payment or reward.” FCPA violations can include cash and non-cash compensation, gifts, travel, meals, charitable contributions, and even employment opportunities and internships afforded to foreign officials or their family members or close associates.

FCPA penalties

There are two primary components of an FCPA violation. The first is the bribe itself and the second is book- and record-keeping requirements to ensure compliance with FCPA. Civil FCPA penalties start at $10,000 for individuals and corporations, and criminal penalties start at $100,000 and five years in prison for bribery and $5 million and 20 years in prison for book- and record-keeping for individuals and $2 million for bribery and $25 million for book- and record-keeping for corporations. Those numbers are often at the low end of monetary sanctions over the last several years in which the average sanction totals have shot up to more than $200 million per corporation, on average.

FCPA investigations

The authorities that enforce the FCPA are the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ). Each authority has a set of criteria it uses to determine whether to launch an investigation or bring charges against a company. The DOJ engages through a formal indictment process, and considers whether the organization self-reports, its history of similar offenses, how pervasive the wrongdoing is, and its remedial actions. The SEC can launch an FCPA investigation formally or informally based on tips from informants or whistleblowers, information from other investigations, self-reports or public disclosures by companies, referrals from other offices or agencies, public sources (such as media reports and trade publications), and simply through proactive investigative techniques.

$25M

is the starting cost of a civil FCPA violation for book- and record-keeping for corporations

How FCPA violations show up in your spend

Even if you run a tight ship from a compliance standpoint, spend-related FCPA violations can still show up in your spend. In certain circumstances, otherwise perfectly legitimate payments can constitute a violation, and they can take many forms, including cash, stock, gifts, meals, or anything of value. When performing anti-bribery and corruption due diligence in your spend systems, it’s critical to review employee T&E expenses, every invoice in your spend automation systems, and even supplier, partner, agent, and employee contracts that can contain indicators of bribery such as offers of stock or options that may never pass through your payables system. Here are just a few ways FCPA violations can lurk in your spend.

Payments related to sales

If you do business in foreign countries, especially in which bribes are expected, your employees or subsidiaries in that locale may have an incentive to pay bribes to foreign officials, their families or close associates, or government-owned entities. If they are aware that these payments are against the law, they may try to conceal them in payments such as benign-seeming invoices. These can be invoices to intermediaries like distributors, contractors, or agencies for unwarranted or inflated commissions or other vague-sounding charges like “handling,” “temporary storage,” “logistics,” “relationship-building,” and “miscellaneous,” or even straight “check-to-cash” transactions.

Payments related to construction projects

If you’re expanding into foreign countries and constructing new facilities, bureaucrats who permits or licenses are a common place to look for evidence of bribery. Look closely at payments associated with the project, as well as any contracts from agents or contractors you’re working with. Country managers or project personnel may create funds within otherwise legitimate contracts in the form of change orders or inflated prices. Keep an eye out for these irregularities as well as missing addenda or vague supporting details.

Payments related to business ease, e.g., exports and licenses

Some foreign countries have rules, fees, and taxes associated with business activity such as imports and exports. The bureaucrats who manage these are in a position to extract bribes from companies that are trying to move quickly and do business. Keep a close eye on payments related to this part of your business. Even if you don’t see evidence in the actual payments, if you find that you are able to be more efficient or advance more quickly than expected, it’s worth digging in and performing an FCPA audit.

Employment and internships

A job or internship can quality as “something of value” in the eyes of regulators. Several companies have been investigated and fined for hiring family members of foreign officials in countries where they do business. It isn’t always apparent, but watching over hiring processes in foreign divisions is critical.

Trips, meals, entertainment, and gifts

Even in the normal course of business, your employees can inadvertently pay for a meal or give tickets to sporting events as gifts to foreign officials or their close associates. It pays off to be extremely careful with T&E spend in foreign countries, especially when it comes to sales and other client-facing personnel. In many cases, your employees may not even realize the person they’re entertaining is considered a foreign official under the law. They may invite a client or partner in the healthcare industry to dinner, not realizing that because healthcare is government-owned or -subsidized, the dinner guest may be considered a foreign official.

$2.2M

is the average monthly cost of an FCPA investigation

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