Doing business in a global economy has unique risks. One risk is third parties soliciting illegal payments (i.e., bribes) from companies in exchange for brokering entry into new markets. Realizing the temptation is great and the practice widespread, the Foreign Corrupt Practices Act (FCPA), an anti-bribery statute that has been around for years, makes it unlawful for any corporation or any corporate officer, director, employee, agent or stockholder acting on behalf of the corporation to make (or promise to make) payments to foreign officials, political parties or other persons for the purposes of influencing or inducing the foreign official to act in a particular manner or to secure a business advantage. In recent years, prosecution of individuals has been a cornerstone of FCPA enforcement efforts, and fines levied on companies and individuals have been ever-increasing. The trends in FCPA enforcement that have emerged and are likely to continue into the future include:
- More focused prosecution of individual wrongdoers
- Increased civil and criminal penalties
- Broadening definition of culpable intent
- Continued push to expand jurisdictional reach
- More sector-wide investigations
- Increased use of traditional law enforcement techniques such as sting operations
- Enhanced international cooperation in the prosecution of corruption
To mitigate the risk of FCPA frauds and defend against criminal and civil litigation, directors and officers should embrace the following practices:
- Communicate a strong “tone at the top” that emphasizes ethics, integrity and honesty in all actions of the company.
- Establish strong policy deterrents to fraudulent action.
- Ensure that the company has comprehensive internal controls throughout the company to prevent or timely detect fraud in a timely manner.
- Challenge the actions of your risk management practices (internal audit, risk management, compliance, legal, etc.).
- Be active in all critical aspects of the business.
- Acknowledge areas in which you may be lacking in knowledge and understanding, and seek out counsel as needed.
- Do not readily accept all that is presented.
- Skepticism and prudence in judgment should always be applied.
- Know the fraud risks common to the various business units and practices.
- Do not defer to management control over the information presented to the board.
Knowing your obligations and responsibilities, as well as designing effective organizational fraud controls, can greatly mitigate criminal and civil litigation exposure.
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