What are the rules in a highly charged global marketplace? This can be a challenge when it comes to managing corruption risk. U.S. organizations and those with U.S.-listed securities must comply with the Foreign Corrupt Practices Act (FCPA), which prohibits the bribery of foreign officials for the purpose of obtaining or retaining business. While this may seem to be a competitive disadvantage, bribery and corruption generally are prohibited in countries worldwide. In fact, all 30 member countries of the Organization for Economic Cooperation and Development (OECD), as well as five other countries, have adopted conventions for combating bribery of foreign public officials in international business transactions. Some countries have laws that are even more invasive than the FCPA.
For organizations with U.S.-listed securities, there are additional requirements regarding reasonable assurance provided by internal controls, as well as maintenance of books and records that accurately reflect transactions and both the nature and quantity of corporate assets and liabilities.
U.S. Department of Justice investigations involving the alleged bribery of foreign officials are on the rise. At the same time, penalties and disgorgements associated with FCPA violations have escalated drastically. Of critical significance to management is the fact that the number of enforcement actions has increased against individual executives, who not only are receiving civil penalties, but also are being incarcerated.
As coordination grows between law enforcement and regulators in the United States and abroad, management needs to consider whether the organization has an effective program in place to prevent and detect corruption risk across the enterprise. This is especially important for those organizations — public, private and not-for-profit alike — that conduct business with state-owned or state-controlled entities in the international market.
Challenges and Opportunities
For many organizations, their journey in managing corruption risk begins with an understanding of potential contact with foreign officials.
Who is a foreign official? This term has been widely interpreted by U.S. regulators to include elected officials of foreign governments and other “public” or “civil” servants, officials of government-owned banks, physicians and laboratory employees of government-owned hospitals, and even engineers of state-owned oil companies.
How is the organization exposed to such individuals or entities? Typically, it is through activities of management and employees, boards of directors, joint venture partners, and other intermediaries who conduct business on behalf of the organization, such as marketing agents and advisors retained to help expand the organization’s global presence.
When may the organization experience a corruption risk event? Opportunities for corruption risk exist amid routine business transactions, such as licensing, real estate leasing, import/export, procurement, and sales/marketing activities. It is essential for organizations to conduct due diligence prior to entering into agreements with third parties, especially acquisition candidates.
Our Point of View
A robust anti-corruption or FCPA compliance program provides a critical “rule book” for any organization in today’s global business environment. Furthermore, management should monitor, on a continuous basis, anti-corruption controls within financial and operational processes to identify potential red flags that may warrant additional or immediate attention. The program should also be audited periodically to ensure compliance across the entire organization.
How We Help Companies Succeed
Protiviti helps clients address corruption risk by understanding where it can occur and implementing strategies to combat it. As a result, our clients protect their reputations, improve their bottom lines and achieve their fiduciary and regulatory responsibilities.
- FCPA compliance and education/awareness programs – We assist clients in the development of FCPA compliance policy, training, education and awareness programs to support their regulatory and compliance initiatives across the organization.
- FCPA compliance audits – We plan and perform procedures to assess compliance with the company’s FCPA compliance program and corresponding policies, procedures and controls. We report areas of noncompliance and recommend solutions to enhance FCPA compliance activities.
- FCPA compliance program assessments – Utilizing Protiviti’s proprietary consulting methodology, we assess a company’s existing FCPA compliance program in the context of authoritative guidance and leading practices. This provides management with an actionable roadmap to help strengthen its corruption risk evaluation, mitigation and monitoring activities.
- Corruption/FCPA risk assessment – We assist management in identifying and prioritizing the organization’s key corruption risk in highly collaborative projects that promote knowledge-and-skill transfer to the company’s personnel. This enables management to enhance its prevention, deterrence and detection capabilities.
- FCPA investigations – We conduct investigations of concerns or complaints involving potential FCPA matters in conjunction with internal and external counsel, management and the board of directors.
- Protiviti was engaged by external counsel of a manufacturing organization to assist in the investigation of “red flags” involving potential FCPA violations. Protiviti obtained and analyzed 300,000 pages of hard copy documents and 1.5 terabytes of scanned document images. We had the immediate availability of six Protiviti professionals fluent in Mandarin who possessed financial and investigative skills, and utilized 20 contracted Mandarin-speaking professionals from our parent company, Robert Half International, to assist with document review and coding. Results of the investigation were reported to external counsel and the company’s board of directors. Our client expressed its appreciation for both our timely response and our ability to provide the right resources for the investigation.
- Protiviti was engaged by external counsel of a global energy company to assist in the investigation of control weaknesses related to potential FCPA violations. We reviewed the company’s internal control framework designed to mitigate corruption risk and conducted more than 30 electronic data routines to identify indicators related to allegations of corrupt vendor and agent payments. In addition, we interviewed designated company personnel located in U.S. and overseas field offices. Results of the investigation successfully supported management’s discussions with its board of directors, external auditors and federal regulators.
- Protiviti was engaged by in-house counsel of a financial services organization to conduct a review of its FCPA compliance and training programs for a foreign subsidiary. Results of our FCPA compliance audit and training program review resulted in enhancements to both programs.