Get ready for an uptick in FCPA enforcement
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The U.S. Biden administration has announced a detailed new anti-corruption strategy, naming corruption as a core national security interest.
On December 6, 2021, the Biden administration announced a sweeping new anti-corruption strategy. The “United States Strategy on Countering Corruption” (SCC) follows President Biden’s declaration, in a June 3, 2021 memorandum, that corruption enforcement is a “core United States national security interest.” This strategy is even more striking in the context of multiple Department of Justice (DOJ) announcements made throughout the fall to “surge resources” for corporate enforcement, revise its corporate criminal enforcement policies, and adopt a new stance on corporate recidivism. This series of recent developments—and folding them into the national security agenda—make clear that the Biden administration is serious about leading the efforts to “prevent and combat corruption at home and abroad.”
Of the nine open Foreign Corrupt Practices Act (FCPA) investigations disclosed by public companies in 2021, five are of non-U.S. companies and all four corporate resolutions in 2021 involved non-US companies. Additionally, of the top ten FCPA fines of all time, nine were levied against non-U.S. companies. For our global clients, this underscores the importance of implementing an effective compliance program that can withstand the scrutiny of aggressive FCPA enforcement. Put another way: we anticipate an increase in FCPA enforcement actions, so now is a good time to review your compliance programs and make any necessary improvements.
Here, we highlight the key elements of the SCC and related developments that are likely to affect corporate operations going forward.
Coordinated intelligence sharing
The U.S. government aims to improve its ability to collect, analyze, and share corruption related intelligence in order to better “map corruption networks and related proceeds.”
To that end, the U.S. government is surging resources to its own established groups working to fight corruption, and it is also strengthening its ongoing cooperation efforts with foreign governments and law enforcement authorities to increase the number of tips and referrals received from abroad.
This plan for coordinated intelligence sharing will inevitably arm U.S. law enforcement authorities with more actionable information and increase the number of FCPA enforcement actions.
Increased transparency and risk to gatekeepers
The Biden administration also recognizes that, to counter corruption effectively, the U.S. government must “combat money laundering, illicit trafficking, and other forms of criminal activity that fuel corruption and allow criminal actors to launder and shelter the proceeds of their illicit activities.”
Accordingly, the U.S. government plans to close the gaps in its current anti-money laundering laws and expand laws that hold the gatekeepers of the financial system, including lawyers and accountants, accountable for potentially complicit misconduct. If successful, these objectives will likely result in additional due diligence requirements, such as enhanced Anti-Money Laundering and Know Your Customer programs.
Rigorous enforcement of these laws may lead to an increased number of parallel DOJ investigations into corruption violations and collateral money laundering offenses.
Corporate criminal liability
The Biden administration also altered DOJ’s corporate criminal liability policies in ways that could have major impact:
- Prosecutors must now consider a corporation’s entire history of misconduct, both domestic and foreign and including violations of criminal laws (apart from the instant offense) that indicate gaps in internal controls, when resolving allegations against corporations. For this review, prosecutors will focus on the recency, seriousness, and pervasiveness of the prior misconduct, and on whether the misconduct is similar in nature to the pending matter.
- Companies must provide to DOJ all non-privileged, relevant facts concerning all individuals involved in or responsible for the misconduct to qualify for cooperation credit. This is a small, but—in certain cases—potentially significant, shift away from the more recent requirement to disclose only those facts relevant to individuals “substantially involved” in the misconduct.
- DOJ now encourages independent corporate monitors in cases where, at resolution, a corporation’s compliance program and controls remain untested, ineffective, inadequately resourced, or not fully implemented. This pronouncement seems intended to result in more resolutions involving the appointment of an independent monitor, a meaningful shift from the prior administration.
Additionally, the DOJ appears to be taking more aggressive action against companies that violate the terms of settled matters and, since October 2021, the DOJ has pursued at least three companies for allegedly failing to live up to the compliance obligations provided for in their settlement agreements. While not unprecedented, alleging a breach of a settlement has been quite uncommon, so this announcement in just two months evidences the DOJ’s seriousness in this regard.