FCPA Compliance: Knowing How to Deal with Public Officers is Key

By Carole Walters
Editor at Traliant

Dealing with public officials poses many ethical and compliance challenges for organizations that do business internationally. High on the list is the risk of bribery and corruption. Training employees and third parties on how to identify and interact with public officials can help minimize the risk of Foreign Corrupt Practices Act (FCPA) violations, while strengthening anti-corruption programs.

The FCPA is the principal federal law that makes it a crime to pay a bribe to a foreign public official for the purpose of obtaining or retaining business. Jointly enforced by the Department of Justice (DOJ) and Securities and Exchange Commission (SEC), the FCPA applies to any company that does business internationally or whose securities are listed in the US. Besides covering anti-bribery, the FCPA also has a books and records and internal controls provision. Both organizations and individuals can be held liable for violating the FCPA.

Foreign officials can be hard to identify
While it may seem obvious,  it’s not always easy to know who is a foreign official. It’s a broad category. The FCPA defines one as, “any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization.”

The term “instrumentality” is commonly referred to as state-owned enterprises (SOEs). These are enterprises that appear to be private but are government owned or controlled. Aerospace, telecommunications, defense and railroad companies are examples of SOEs and their employees are considered foreign officials. Bribes to SOE employees accounted for over 80% of bribes in 2016, according to the Organisation for Economic Co-operation and Development.

Some examples of public officials: 
Heads of State
Cabinet Members
Ministers and Deputy Ministers
Judges and magistrates
Police and other law enforcement
Career government workers
Officers, employees and people working on behalf of public international organizations

Recent FCPA Violators
Most FCPA cases involve illicit payments and favors to public officials in order to win business. In July, the former president of Chestnut Consulting Group, a financial consulting firm, was sentenced to five years in prison and ordered to forfeit $1.9 million for bribing an official at the European Bank for Reconstruction and Development (EBRD)  in order to win approvals for millions in EBRD investments and loans for Chestnut’s clients.

Last year, Teva Pharmaceutical agreed to pay $519 million to settle charges it made illicit payments to government officials in Russia and the Ukraine and doctors in Mexico to increase its market share and gain approval for selling its drugs.

For JP Morgan Chase, it was its “friends and family” approach to winning more than $100 million in bank deals that led to FCPA violations and a $264 million fine in 2016. The SEC said investment bankers at JPMorgan’s subsidiary in Asia created a client referral hiring program that bypassed the firm’s normal hiring process to give high-paying jobs and internships to approximately 100 individuals at the request of foreign government officials.

Traliant Insight
Bribery and corruption in the workplace are serious crimes, whose costs go far beyond criminal penalties and large fines. Organizations can manage and minimize the risk of FCPA violations by educating employees and third parties on how to deal with public officials – and their friends and families – and communicating clear guidelines on acceptable and unacceptable behavior.

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