Justice, SEC Shed Light on Anti-Bribery Laws

New guidance from the government may help banks and other financial institutions avoid running afoul of anti-bribery laws.

Maintaining an effective compliance program, self-reporting wrongful conduct when it is discovered and cooperating with authorities all can help companies avoid enforcement action under the Foreign Corrupt Practices Act, according to a guide published jointly Wednesday by the Department of Justice and the Securities Exchange Commission.

The guidance comes amid a campaign by the U.S. Chamber of Commerce and others to ease what the groups say can be the financial burden on businesses that become the subject of an FCPA investigation. In October 2010, the chamber recommended a set of proposed changes to the FCPA the organization said would provide companies with added certainty and limit their liability for violations by subsidiaries and businesses they later acquire.
 
"The guide is an unprecedented undertaking by DOJ and SEC to provide the public with detailed information about our FCPA enforcement approach and priorities," Lanny Breuer, assistant attorney general for the DOJ's criminal division, and Robert Khuzami, director of enforcement at the SEC, wrote in the foreword.

The FCPA prohibits payments by U.S. public companies to foreign officials with the goal of winning or retaining business. The 120-page guide describes the act's provisions and provides some of the thinking the government uses in deciding whether, and to what extent, to pursue violations. Though the guidance is broad, the guide includes a series of examples drawn from cases the government has reviewed in recent years.

In one, the Justice Department and SEC declined to take enforcement action against a financial institution over real estate transactions with a government agency in China after the company discovered that a special purpose entity created for the deal was being used as a vehicle for corrupt payments to at least one Chinese official. "The financial institution, through a robust compliance program, frequently trained its employees, imposed a comprehensive payment-approval process designed to prevent bribery, and staffed a compliance department with a direct reporting line to the board of directors," according to the guide.

Though the compliance program failed to catch the apparent corruption, the government later decided the failure resulted from misrepresentations by the Chinese official, the financial institution’s executive in charge of the project, and its attorney, and not from a failure by the institution itself.

In general, paying cab fare, buying reasonable meals, providing entertainment or giving away promotional items are unlikely to influence officials and, consequently, unlikely to lead to enforcement action by the DOJ and SEC. "The more extravagant the gift, however, the more likely it was to be given with an improper purpose," according to the guide.