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GLOBAL CORPORATE COMPLIANCE &COMPLIANCE RISK ASSESSMENTFALL .docx
- 1. GLOBAL CORPORATE COMPLIANCE & COMPLIANCE RISK ASSESSMENT FALL 2014 FORDHAM LAW SCHOOL ©Basri 2014
- 3. 1 Carole Basri What is the Foreign Corrupt Act (FCPA)? Enacted in 1977, the FCPA makes it a crime for an American Company to bribe or have others bribe on its behalf, foreign officials in an effort to win or retain business.
- 4. 2 Carole Basri Under the FCPA, it’s a crime to do the following: Pay a bribe; Offer to make a bribe; or Authorize a payment to make a bribe.
- 5. 3 Carole Basri The FCP covers payments to the following: Government employees; Political parties; Party officials; Candidates; Employees of state owned enterprises; or Employee of public international organizations, i.e. UN, IMF, World Bank.
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- 7. Carole Basri What is “anything of value”? “Anything of value” could be “anything” given “corruptly” or for the “evil motive or purpose” of inducing “the recipient to misuse his/her official position in order to wrongfully” obtain business.
- 8. 5 Carole Basri BUT Some Payments are OKAY!
- 9. 6 Carole Basri Three Payment Exceptions under the FCPA: Grease payments; Reasonable and bona fide entertainment expenses; and Defense against prosecution payments.
- 10. 7 Carole Basri Grease payments are allowed. Grease payments are to “expedite or …secure…a routine governmental action”. Examples of grease payments are payment for: Obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; Processing governmental papers, such as visas and work orders; Providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to transit or goods across country; Providing phone service, power and water supply, loading and
- 11. unloading cargo, or protecting perishable products or commodities from deterioration; or Actions of a similar nature.
- 12. 8 Carole Basri Critical Point The payment must be for a “routine governmental action.” This would never cover payments to influence: “Any decision by a foreign official whether, or on what terms, to award new business to or to continue business with a particular party”
- 13. 9 Carole Basri Reasonable and bona fide entertainment expenses are allowed. This includes “travel and lodging expenses” for foreign officials provided that the expenses are directly related to: The promotion, demonstration, or explanation of products or services; or The execution or performance of a contract with a foreign government of agency thereof.
- 14. 10 Carole Basri Defense against prosecution payments are allowed. This only applies if the payment are permitted under the laws of the foreign country. This is rare.
- 16. The biggest risk under the FCPA is not that American employees will pay bribes, but that foreign business consultants and/or joint venture partners will.
- 17. 12 Carole Basri Remember! Ignorance is not a defense if you should have known and did not ask.
- 18. 13 Carole Basri Standard precautions in hiring foreign agents or participating in joint ventures include: Due diligence checks on agents; Inserting standard clauses in contracts; and Setting up “red flags” to provide internal controls in accounting.
- 19. 14 Carole Basri 1. Due Diligence Checks on Agents Due Diligence checks on agents should include: Background checks; Investigating family and business ties with government officials; Inquiring about agents at U.S. Embassy, State Department and Commerce Department.
- 20. 15 Carole Basri 2. Insert Standard Clauses in Contracts
- 21. Standard contracts clauses with agents and joint ventures should include representations that will comply with the FCPA
- 22. 16 Carole Basri 3. Set up “Red Flags” to Provide internal Controls One you hire and agent, look for ‘red flags” including: Lack of standard invoices; Bank accounts in a third country; Check drawn to cash; Unusual bonuses; Rumors about kickbacks or bribes in the company; Lack of internal controls; Country in questions has traditionally had corruption issues; Agent’s commission is excessive or paid in cash; Agent is related to government official; Agent’s company is owned by government official or his family; Agent has requested false documentation; and Under local law, its illegal for agent to act as an agent.
- 23. 17 Carole Basri Penalties for Violating the FCPA include: Up to 5 years in jail; $100,000 for each participant including officers, employees, directors, agents and stockholders; Fines up to $2,000,000 to the company plus pecuniary loss; Barred from doing business with Federal Government; and Competition can sue for treble damages under RICO.
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- 25. Carole Basri Five-Phase Approach APPROACH PHASE I PHASE II PHASE III PHASE IV PHASE V High-level Compliance Assessment Develop or Enhance Overall FCPA Corporate Compliance Program Evaluate and Enhance Polices and Procedures Communication, training and Implementation Ongoing Self-Assessment, Monitoring and Reporting
- 26. 19 Carole Basri Five-Phase Approach- Phase I High level compliance Assessment Communicate and Educate High-level Review Risks and Controls Baseline review Risks and Controls Best Practices and Gaps Work Plan, Responsibility Assignment and Time line Senior Management Meetings (s)
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- 28. Carole Basri Five-Phase Approach- Phase II Develop or Enhance Overall FCPA Corporate Compliance Program Code of Conduct FCPA Corporate Compliance Program Guidelines Compliance Function Compliance Help Line (Ethics Line)
- 29. 21 Carole Basri Five-Phase Approach- Phase III Evaluate and Enhance Policies and Procedures Gift and Entertainment Policy Expense Approval and Documentation Policy Hiring of Foreign Partners, Agents, Consultants and Marketing Representatives Policy Background Check Policy FCPA Contract Clauses
- 30. 22 Carole Basri Five-Phase Approach- Phase IV Communication, Training and Implementation Introduce Code of Conduct and FCPA Program Ongoing Communication Plan Training plan Training materials/Video Tapes Training Schedule
- 31. 23 Carole Basri Five-Phase Approach- Phase IV
- 32. Ongoing Self-Assessment, Monitoring and Reporting Management Controls Monitoring Tools Self-Assessment Tools Internal Audit
- 33. 24 Carole Basri Thank You Carole Basri President, Corporate Lawyering Group, LLC www.corporatelawyeringgroup.com Adjunct Professor, Fordham University Law School Adjunct Professor, School of Transnational Law, Peking University 917-822-2447 [email protected]
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