The Foreign Corrupt Practices Act has always been a law much broader than its name suggests.
Sure, the FCPA contains anti-bribery provisions which concern foreign bribery.
Sure, the FCPA’s books and records and internal controls provisions can be implicated in foreign bribery schemes.
However, the fact remains that most FCPA enforcement actions (that is enforcement actions that charge or find violations of the FCPA’s books and records and internal controls provisions) have nothing to do with foreign bribery. For lack of a better term, these enforcement actions have longed been called non-FCPA, FCPA enforcement actions by this site.
The latest example concerns Royal Bank of Canada (RBC) a Canadian chartered bank with shares listed on the New York Stock Exchange.
This SEC order finds in summary fashion:
“This matter concerns internal accounting control deficiencies relating to accounting for internally developed software (“IDS” – a software that a firm develops internally rather than purchasing from a third party provider) costs by Respondent Royal Bank of Canada. From 2008 through 2020, Respondent experienced a growth in IDS spending to support the growth of the organization. However, development of its control environment did not keep pace and internal accounting control deficiencies affected Respondent’s cost capitalization accounting for IDS projects. Respondent applied a single capitalization rate to certain of its IDS project costs but lacked a reliable mechanism for determining the appropriate capitalization rate to apply. Among other issues, Respondent’s deficient internal accounting controls resulted in Respondent capitalizing certain costs that were ineligible for capitalization under the appropriate accounting methodology. Respondent also lacked sufficient internal accounting controls to assess for indicators of impairment and to recognize amortization when assets were available for use, which resulted in Respondent carrying certain capitalized IDS assets on its balance sheet when those assets should have been impaired or amortized over their useful life.”
Based on the above, the order finds that RBC violated the FCPA’s books and records and internal controls provisions.
Without admitting or denying the SEC’s findings, RBC agreed to cease and desist from committing or causing any future violations of the books and records and internal controls provisions and also agreed to pay a $6 million civil penalty. The order states: “Respondent shall receive an offset against the civil money penalty consisting of the United States dollar (“USD”) value of amounts paid by Respondent to Canadian regulatory authorities concerning the matters set forth herein (the “Canadian Payments”).”
In the SEC release, Nicholas Grippo (Regional Director of the Philadelphia Regional Office) stated:
“Royal Bank of Canada had longstanding internal accounting control deficiencies that it failed to adequately address. Properly functioning internal accounting controls are a front-line defense and help ensure accurate financial disclosures—the backbone of our capital markets.”
