Peril in Distant Lands: Understanding the Foreign Corrupt Practices Act

January 2014

IN THIS ISSUE

— Expanding Markets, Expanding Risks: Doing Business Worldwide
— Protecting Your Company from FCPA Prosecutions Before They Happen

GREETINGS!

Welcome to the January edition of our newsletter! In this issue, we’ll examine how the Foreign Corrupt Practices Act (“FCPA”) can affect your business in an increasingly global marketplace.

EXPANDING MARKETS, EXPANDING RISKS: DOING BUSINESS WORLDWIDE

In the last 20 years, technological advances have changed the way commerce takes place: communication happens instantaneously in many parts of the world, and billions of people in Asia and Africa now have smartphones. As goods and services expand their reach into ever farther concerns of the world, the risks to businesses looking to work within those areas also rise.

For U.S, businesses, those risks occur mostly within the purview of the FCPA, which prosecutes U.S. companies for illegal and unethical business practices — principally bribery and other forms of influence peddling, such as favoritism toward a target’s family — conducted with officials of a foreign government. The number of FCPA prosecutions has risen steadily since the law’s last revisions in 2008, and the trend is predicted to continue well into the new year.

PROTECTING YOUR COMPANY FROM FCPA PROSECUTIONS BEFORE THEY HAPPEN

Given the increase in the statistical likelihood that your company could one day face an FCPA investigation, the best measures to take are proactive, preemptive ones: although the quality of public records varies in other countries when compared to those available in the U.S., researching the reputations of public officials with whom your company is likely to interact is a good way to start. If your company is looking to hire a local agent or broker to act as an intermediary, a thorough public records investigation should be supplemented with discreet interviews of past (and possibly current) clients, former colleagues at other positions, friends, relatives, and also local law enforcement (especially if any possible infractions, however seemingly minor, are found in the public records phase.)

Although there is much overlap between a typical due diligence assignment regarding a U.S. subject and one overseas, some unique skills are required to effectively conduct an FCPA-related due diligence. Chief among these is an understanding of the political and cultural dynamic within the country (and often the state/region within that country), which can be much less homogeneous than it is within developed nations. Local leaders act often in local interests, and in accordance with local mores and values. Using a researcher who has a basis of knowledge about the countries and regions in which your company may do business can help your company see and understand the risks before they have a chance to hurt your bottom line.