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The FCPA Doesn’t Answer Many Of The Questions Compliance Professionals Have

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Naturally, and understandably, those tasked with Foreign Corrupt Practices Act compliance within a business organization want clear answers to many questions.

However, the FCPA rarely provides clear answers and this is particularly true with the internal controls provisions.

The provisions are not rule-based, but principle-based in the sense that the key statutory language is that issuers  shall “devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances” that certain financial objectives are met. The FCPA then defines  “reasonable assurances” to mean “such level of detail and degree of assurance as would satisfy prudent officials in the conduct of their own affairs.”

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This Could Lead To Problems

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Reading the news with Foreign Corrupt Practices Act goggles is an occupational hazard.

So it was with this recent Wall Street Journal article titled “Companies Silo China Businesses to Cut Risk.”

If you follow compliance lingo, you know that “silo” (an actual four letter word) is like other four letter words.

The article states “more western companies are siloing parts of their businesses in China as they try to lower risks from tensions between Washington and Beijing” and cites various examples of companies “effectively isolating its China businesses from its global operations.”

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“Compliance Officer” / Dad

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Yesterday was Father’s Day and for the seventh straight year I publish this post (with updates) as the “compliance officer” / Dad journey continues and our twin boys turned 15 this year.

Father is just one of my titles when it comes to the boys. Coach and Compliance Officer being a few others. As to the later, Co-Compliance Officer along with my wife is the more accurate title (I wonder what the “Compliance 2.0” [or are we on to 3.0 now] folks would say about this structure)?

Father’s Day is a chance to reflect and to be sure being a Dad has informed my view of many things including compliance. When you really think about, compliance and parenting have a lot in common.

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Survey Says ….

Survey Results

Recently, White & Case and KPMG released the results of a “2023 Global Compliance Risk Benchmarking Survey” based on “opinions of 201 senior decision-makers from more than 30 countries.”

It is interesting to view several survey responses through the lens of what the DOJ and SEC want companies to do.

For instance, a meaningful percentage of organizations: have never conducted a risk assessment; do not have a written policy regarding engagement with and interaction with third parties; do not require third parties to complete anti-corruption training; do not conduct due diligence of third parties; or do not conduct audits on third parties to assess compliance with anti-corruption requirements.

None of these tasks of course are specifically required by the Foreign Corrupt Practices Act (or other related laws). However, failure to do these tasks have all been alleged in various FCPA enforcement actions most often as an alleged internal control deficiency.

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Issues To Consider From The Philips Enforcement Action

Issues

This recent post highlighted the approximate $62 million Foreign Corrupt Practice Act enforcement action against Philips based on conduct in Angola. By resolving another FCPA enforcement action, Philips joined the corporate FCPA repeat offender club.

This post highlights additional issues to consider.

Timeline

As highlighted in this prior post, Philips had been under FCPA scrutiny since at least June 2019.

Thus, from start to finish, the company’s FCPA scrutiny lasted approximately four years.

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