Does your business sell or buy products outside the United States? Do you know how your sales or procurement departments are getting those products through customs in the foreign country? Are you working on a project that requires a permit or other approval from a foreign government? Are you or your local project consultants making payments to foreign officials in order to obtain the required government approvals, and could those payments be considered illegal bribes? Now is a good time to figure that out.
The U.S. Foreign Corrupt Practices Act (FCPA) generally makes it illegal to pay or offer anything of value to a foreign official with the goal of obtaining an improper advantage or to obtain or retain business. Turning a blind eye to a violation is not an option, even for smaller, privately-held companies who are required to comply with the FCPA, too.
The U.S. Department of Justice (DOJ) has stepped up investigations into foreign bribery allegations under the FCPA, and recent indications are that this trend will continue in 2017. The DOJ recently announced it is extending its Enforcement Plan Guidance issued in April, 2016 and previously due to expire in April, 2017. The Guidance detailed greater resources for investigations and prosecutions, as well as a Pilot Program to encourage voluntary disclosure of violations under the FCPA.
As of the beginning of the year there were as many as 80 Securities and Exchange Commission and DOJ investigations against public companies, with, according to some sources, an additional 100 investigations against privately-held companies. A larger number of smaller companies are being scrutinized due to DOJ’s continued stepped up enforcement efforts. Although the larger fines receive the most press (Walmart is fighting $600 million-plus in potential FCPA violation fines), the DOJ consistently investigates smaller businesses and enforces much smaller fines. This past September, NCH Corporation, a privately-held industrial supply and maintenance company based in Irving, Texas, was required to forfeit profits it made on illegally obtained sales in China and to pay these over to the U.S. government in the amount of $335,342. NCH did so under the Pilot Program of self-reporting.
In addition to forfeited profits, fines and legal fees add to the bottom-line costs of FCPA violations. Furthermore, there is the real potential of responsible individuals serving lengthy jail time. So consider including FCPA risk assessment and compliance as part of your corporate compliance program. As we mentioned last summer, Small Businesses Need Compliance Programs, Too. Start with a conversation with your staff regarding methods of doing business outside of the U.S. Knowledge is power, and it is critical to designing a compliance program that is appropriate for your business.