The Foreign Corrupt Practices Act (FCPA) was passed by Congress in 1977 and outlaws bribery (so-called facilitating payments) of foreign government officials by companies (inc. SEC regulated) seeking to obtain business deals abroad. Though hardy ever enforced until mid-90s, international business expansion (especially in developing countries) and more government prosecution have increased the likelihood of FCPA violations. Global companies must heed recent FCPA enforcement trends in order to adjust the compliance efforts accordingly. It is equally important that “books and records” provisions are affected by bribery schemes.
Generally FCPA violations take place on the front line, but they can reach upper levels in some cases. It increases the corporate reputational risk. Prosecution of companies almost always entails out-of-court plea agreements to minimize this risk.
Compliance audit has a mayor role in this area to minimize the impact. In the past years, the Department of Justice has persistently prosecuted companies that maintain poor compliance programs. If active and comprehensive compliance programs and independent investigations of suspicious activities can not be demonstrated by prosecuted Companies, the Department of Justice has considerable leverage to make harsher punishments since most cases are plea-bargained. Therefore, it is favorable that Companies actively investigate incidents even founded on constructive knowledge.
I have prepared a table with the cost impact for the three major FCPA fines applied (Siemens, Baker Hughes and Willbros Group). In average, it shows that the total allegations costs rose to 5.33 times the prosecuted facilitating payment.
