The SEC may bring civil enforcement actions against issuers and their officers, directors, employees, stockholders, and agents for violations of the anti-bribery or accounting provisions of the FCPA. Companies and individuals that have committed violations of the FCPA may have to disgorge their ill-gotten gains plus pay prejudgment interest and substantial civil penalties.
Companies may also be subject to oversight by an independent consultant. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation.
This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Facilitating Payment A facilitating payment is a financial payment that may constitute a bribe and is made with the intention of expediting an administrative process.
What Are Anti-Boycott Regulations? Anti-boycott regulations prevent customers from withholding their patronage of a business. In the US, this primarily deals with Israeli businesses.
What Exactly is 'Book Income'? The calculation and purpose of book income in financial reporting and how it differs from taxable income. Antitrust Laws: Keeping Healthy Competition in the Marketplace Antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing.
What Is Disgorgement? Disgorgement is repayment of ill-gotten gains that is imposed on wrongdoers by the courts. Funds are paid back with interest to those affected.
Partner Links. Related Articles. Corruption increases costs to society. This includes political, social, economic, and governmental costs resulting from unethical business conduct. By adopting and enforcing strong FCPA compliance programs, companies can help reduce these costs.
Corporate success depends on certainty, predictability, and accountability. An environment where corruption is rampant costs companies time and money, and it can lead to disruptions in the continuity of their business operations.
FCPA compliance instills predictability in investments, business transactions, and dealings with foreign officials. Companies are more likely to be successful in an environment that emphasizes fair competition, and in which all competitors sell their products and services based on differentiation, pricing, and efficiency.
Corruption and bribery allow for unfair results in the marketplace. For instance, companies that utilize bribes can achieve increased sales and increased market share despite offering an inferior product at an uncompetitive price.
The penalties imposed under the FCPA incentivize the disclosure and reporting of statutory violations. These penalties include fines, imprisonment, disgorgement, restitution, and debarment. The risk of significant penalties is an important factor for companies to consider when deciding how much time, effort, and money to invest in constructing an FCPA compliance program. Anti-corruption laws foster business expansion and stability both domestically and globally.
For companies that plan to expand domestically or internationally, success depends on the existence of a competitive environment in which companies compete fairly based on product differentiation, price, and other market factors.
Fair competition and growth opportunities are hampered when competitors can simply bribe their way to success. Therefore, FCPA enforcement is essential to maintaining fair competition. DOJ and SEC investigations can severely disrupt efforts to maintain stability and predictability, and they can lead to significant financial and reputational harm.
Companies that regularly utilize corruption and bribery to achieve their business goals often resort to other illegal practices as well. This includes forced labor and child labor. These types of human rights abuses are commonplace in countries where corruption and bribery are widespread. To reduce the risk of these human rights abuses, it is crucial for company personnel to be educated on the potentially disastrous consequences of corruption and bribery.
Developing a robust compliance policy is the best way to educate personnel, reduce the risks of corruption and bribery, and eliminate the human rights abuses associated with these risks. The FCPA encourages open communication between companies and their legal counsel. Achieving these objectives requires open and honest communication between the company and legal counsel. Due to the severe sanctions imposed under the FCPA, companies are incentivized to hire counsel to advise them with regard to compliance and to adopt and implement effective FCPA compliance programs.
Working with legal counsel to develop robust FCPA compliance policies and procedures can help prevent company personnel from offering bribes and engaging in other corrupt practices while also encouraging the internal disclosure of suspected violations. As a result, all companies that do business with foreign entities would be well-advised to work with legal counsel to develop comprehensive FCPA compliance policies and procedures.
For example, the DOJ and the SEC have literally written the book 1 now in its second edition on the subject, and have also provided general guidance on effective compliance programs 2. Considering all of the ways that illicit payments can happen within a large organization, the need for strong technology to drive FCPA compliance is compelling.
A global company simply has too many third parties and too many transactions to manage the task with manual, paper-based systems. Examples of these controls include no reimbursements for gifts, travel, or entertainment expenses without evidence of prior spending approvals or receipts, and no payments to high-risk third parties whose due diligence is incomplete.
The technology should also include detective controls, where auditors can trace a questionable transaction and all of its attendant documentation.
This also means that companies need a single source of truth about their transactions: due diligence performed on an intermediary, a contract signed with a third party, verified documentation for payments issued, etc. Documentation compiled on fake spreadsheets that are passed along to management is regularly found in FCPA enforcement actions. Enforcement of the FCPA remains a high priority for US prosecutors, and enforcement of other anti-bribery statutes around the world is also on the rise.
All of this emphasizes that building an FCPA compliance program, complete with effective internal accounting controls, is a crucial risk management priority. However, with determination and the right technology, the path to an effective compliance program is fairly straightforward: risk assessment, followed by anti-bribery policies and procedures, supported by internal spending controls, and then test regularly to find weaknesses and remediate as needed.
August 2 Evaluation of Corporate Compliance Programs. June FCPA Clearinghouse.
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