The End of FCPA Enforcement Under Trump?

September 2017Articles The National Law Journal

Since the presidential election, many have suggested that the Trump administration will reduce enforcement of the Foreign Corrupt Practices Act (FCPA), which generally prohibits U.S. companies from bribing foreign officials to keep or gain new business.

President Donald Trump is on the record opposing the FCPA, and initially signaled that the U.S. Department of Justice may focus on other areas of enforcement.

However, recent statements from Department of Justice officials indicate that that’s unlikely. Rather than relaxing FCPA enforcement, the statements suggest the DOJ plans to continue to vigorously pursue investigations and prosecutions under the statute.

The first indication came in March, when the DOJ announced that it would extend its FCPA “Pilot Program.”

The initiative, launched in April 2016, is designed to reward self-disclosure of FCPA violations, cooperation with FCPA investigations and meaningful remediation efforts.

This extension of an Obama-era program demonstrates that the Justice Department still seeks to enforce the FCPA and to reform and innovate how it investigates and prosecutes FCPA violations.

Trevor McFadden, the Department of Justice’s Criminal Division acting principal deputy assistant attorney general, gave an even clearer signal in April, when he confirmed the department’s commitment to enforcing the FCPA.

McFadden said prosecutors at the Justice Department are “intent on creating an even playing field for honest businesses” and that the DOJ “remains committed to enforcing the FCPA and to prosecuting fraud and corruption more generally.”

Later that month, U.S. Attorney General Jeff Sessions personally affirmed the Department of Justice’s continued enforcement of the FCPA.

The attorney general said the department “will continue to strongly enforce the FCPA and other anticorruption laws” and noted that the department maintains a commitment to “reward effective compliance programs.” He also acknowledged the significance of self-disclosure, remediation efforts and robust compliance programs in the department’s decisions to pursue charges.

Both Sessions and McFadden said the Department of Justice will continue to focus on prosecuting both individuals and companies that break the law.

With the Department of Justice’s continued enforcement of the FCPA, how can companies doing business abroad—especially those working with third-party representatives—ensure they are in compliance?

It starts with aggressive risk management and compliance programs. The Department of Justice and U.S. Securities and Exchange Commission have both indicated that they factor the existence of a compliance program into the decision on whether or not to bring charges against a company.

Compliance programs should include written policies summarizing the FCPA and practical guidance on dealing with foreign sales representatives, consultants and partners, monitoring high-risk activity, evaluating red flags and investigating and reporting alleged violations. They should be tailored to the company’s specific business and its unique risks, and must be clearly articulated and strictly adhered to by all relevant employees. Compliance training should be provided to all directors, officers and relevant employees as well as to agents and business partners. The program should be regularly audited so it can evolve with the business.

Due diligence procedures for all foreign parties with which the company does business are another key component. Third parties, including agents, consultants and distributors, are commonly used to conceal payments of bribes to foreign officials in international business transactions. Companies must, therefore, carefully vet not only their customers and suppliers but also their agents, consultants and distributors. Contracts with third parties should include a provision citing the FCPA and obligating all parties to abide by it.

Finally, accurate financial record keeping is imperative. All transactions should be recorded accurately and in reasonable detail. If the FCPA is unintentionally violated, the existence of adequate and clear documentation will allow the company to demonstrate its best efforts to comply with the statute.

The SEC can file action against any public company that does not comply with the FCPA’s record keeping requirements and requires public disclosure of FCPA violations by public companies.

Violations of the FCPA carry criminal and civil penalties that can include multimillion-dollar fines and even prison time. With the Justice Department making no indication that it plans to back off enforcement, now is the ideal time for companies to revisit and redouble their compliance efforts.

Reprinted with permission from the September 7 issue of The National Law Journal. (c) 2017 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.