Pilot Could Change Voluntary Reporting of FCPA Violations
On the heels of news that VimpelCom is expecting to pay $105 million in legal fees to resolve its Foreign Corrupt Practices Act (FCPA) case, the U.S. Securities and Exchange Commission (SEC) announced that it has settled another FCPA case with pharmaceutical giant Novartis for bribery in China.
The fine against Novartis is relatively small ($25 million) compared to the fine against VimpelCom, which saw the company pay a whopping $795 million to authorities over the telecom giant’s entry into the Uzbekistan market. However, these incidents highlight a growing focus on curbing the bribery of foreign officials to obtain business advantages. For its part, the U.S. Department of Justice (DOJ) this month has announced some new measures in its fight to combat FCPA violations.
The DOJ recently released a memorandum that details new resources that will “significantly augment the ability of the Criminal Division’s Fraud Section and the Federal Bureau of Investigation (FBI) to detect and prosecute individuals and companies that violate the FCPA.” These resources include 10 additional prosecutors and three new squads of FBI special agents, all of who will be devoted to FCPA investigations and prosecutions.
The memorandum also introduced a new pilot program designed to incentivize companies to self-report potential FCPA violations. Under the program, to receive credit for full cooperation companies must:
- Disclose—on a timely basis—all facts relevant to the wrongdoing at issue
- Proactively rather than re-actively cooperate with officials by disclosing facts relevant to the investigation, even when not specifically asked to do so
- Preserve, collect and disclose relevant documents and information
- Provide timely updates of their internal investigations
- De-conflict an internal investigation with the government investigation
- Provide all facts relevant to potential criminal conduct by all third-parties
- Make available company officers and employees who have relevant information
- Discuss all relevant facts gathered during a company’s independent investigation
- Disclose overseas documents, indicating the location of such documents and who found them
- Facilitate third-party production of documents and witnesses from foreign jurisdictions
In addition, companies will also be required to demonstrate that they have implemented an effective compliance program which includes:
- Establishment of a culture of compliance
- Allocation of sufficient resources to the compliance program
- Independence of the compliance function
- Appropriate discipline of employees for misconduct
The credit for voluntary self-disclosure, full cooperation and timely and appropriate remediation in FCPA matters may include:
- Up to 50% reduction off the bottom end of the sentencing guidelines fine range
- Removal of the requirement to have a monitor (read HSBC battle over a 1,000 page independent monitor’s report and its $1.9 billion settlement)
- Declination of prosecution
Some feel that the DOJ has missed an opportunity to establish “bold and clear guidance” on how to be transparent and support law enforcement efforts, while the U.S. Chamber Institute for Legal Reform (ILR) sees the program as “a good step toward greater cooperation and clarity”. Proof, of course, will be in how many companies participate in the program.
About Andrew Simpson
Andrew Simpson (LinkedIn | Twitter) is Chief Operating Officer at CaseWare RCM and has more than 20 years of experience building businesses in the fields of information systems audit and security, data analytics, Anti-Money Laundering and forensics. He is a regular contributor to conferences and a recognized thought leader in financial crime management.