In recent times, when it comes to anti-corruption and bribery laws, the global regulatory environment for international businesses has become infinitely more complex and the jurisdiction of various overseas domestic law enforcement agencies has been viewed expansively by these bodies. Two of the more prominent law enforcement agencies are the US Department of Justice ("DOJ") and more recently, with the introduction of the new UK Bribery Act in 2011, the UK's Serious Fraud Office. In this article we'll focus on the former of the two agencies, the DOJ.
Most will have heard of the huge monetary fines imposed by the DOJ as a result of what it alleges to be a breach of the Foreign Corrupt Practices Act ("FCPA"). The last thing an Australian business wants is top billing on the DOJ's list of bribery related penalties, or for that matter, a director or employee to be incarcerated in the US, but what should you do when, despite being a business registered and headquartered in Australia, the DOJ comes knocking?
What is the FCPA?
The FCPA is a federal law of the US which, among other things, is known primarily for its sections which deal with the bribery of foreign officials, or in essence, government officials.
Under the FCPA, it is a criminal offence to make a payment or offer payment to a foreign official for the purposes of obtaining business for any person. Of concern for Australian businesses, in certain circumstances, the FCPA may extend to foreign entities and citizens involved in such corrupt payments while they are on US soil.
The FCPA also prohibits the use of mail or the use of instrumentalities of interstate commerce corruptly. On this basis, the FCPA may be triggered by, for example, sending an e-mail to a company in the US, holding a meeting in the US or wiring funds to a US bank account for the purposes of bribery. As the DOJ is responsible for all criminal enforcement with respect to foreign companies, it will be the US agency a business must deal with if, for whatever reason, they become a person of interest.
The FCPA covers a number of categories of persons; issuers, domestic concerns and any person. "Issuers" relate to any US or foreign corporation that has a class of securities registered; for example, if your shares are traded on the New York Stock Exchange. A "domestic concern" relates, in a nutshell, to any individual who is a resident and any corporation organized under or having its principal place of business in the US. "Any person" covers both individuals and businesses. Foreign nationals are also within the reach of the FCPA if they act as an agent of an "issuer" or a "domestic concern", which includes employees, consultants and joint venture partners.
Any breach of the FCPA can result in serious consequences for a business and the individual involved; from jail time to large fines (pursuant to the US Alternate Fines Act which makes provision for a fine of twice the benefit a party sought to obtain) to being banned from tendering for US government contracts.
There may also be consequences at home, for example, where the rules of a government agency may not allow for the payment of grants or financial assistance to a business found to be involved in corruption. The impact to the reputation of a business can also be difficult to manage.
What can an Australian business do to reduce its risk?
The importance of knowing your business partners through proper due diligence, such as group ownership and the financial dealings of the firms they do business with, as well as maintaining proper records, cannot be overstressed. Although this is not an exhaustive list, ways to reduce the risks include:
1. make discreet inquiries in relation to joint venture partners to determine their qualifications and whether they have links to their government;
2. look into your partners' reputation and number of clients;
3. contact your local US embassy and inquire as to their reputation in the US;
4. conduct research as to whether they have been found guilty of bribery and corruption;
5. be alert to unusually high commissions (which can be used for the purposes of bribing local government officials); and
6. be on guard to a general lack of transparency and unwillingness to provide the above or similar information.
A proper staff training program in relation to what is acceptable (such as giving appropriate gifts) and not acceptable (monetary bribes, etc) is also a necessary step. Such controls and education programs may also assist a business should it find itself the target of a DOJ investigation. It does not bode well for a business that does not have such systems in place.
We should point out that payments required for routine government actions (also known as "facilitation payments") such as for the provision of a visa, telephone service or power and water supply, are exempt from the FCPA bribery provisions (of note, they are not under the new UK Bribery Act).
The five things an Australian business should do when the DOJ makes contact as part of a bribery investigation
In our experience, the following points may be of assistance:
1. retain experienced counsel from the outset and brief them fully;
2.investigate the full facts surrounding the accusations and then determine whether co-operation is the best way forward;
3. carefully manage any interaction (meetings/correspondence) with the DOJ;
4.have evidence of an established best practicedue diligence system when it comes to new business and maintain full records; and
5. have evidence of an established best practice training system to ensureemployees arewell versed in bribery and corruption indicators.
The DOJ will expect to see full evidence of the last two points and a failure to produce such evidence may prejudice a businesses position and ultimately impact on the size of any monetary settlement.
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