It’s important for all U.S. companies to invest the necessary resources into compliance oversight on the front end to prevent regulatory violations from occurring.
When it comes to incidents of overseas corruption and bribery, it’s often not a stretch that other types of export violations will be identified in the mix.
That’s why it’s crucial for U.S. export compliance officers to become familiar with the details of the Foreign Corrupt Practices Act (FCPA) and layer this compliance aspect within their corporate compliance programs.
FCPA was enacted by Congress more than 40 years ago to make it illegal for persons or entities to make payments to foreign government officials in order to obtain or retain business.
Despite this fact, it amazes me that American companies, including some of the biggest and savviest in the world, still allow themselves to become ensnared by FCPA violations.
Take for example Walmart. The company recently reached a $282.7 million settlement with the U.S. Justice Department for FCPA-related violations that allegedly occurred in Brazil, Mexico, India and China between 2000 and 2011 while the retailer raced to build operations in those countries.
Walmart admitted that as a result it spent more than $900 million on FCPA inquiries and investigation, its global compliance program and organizational changes during the seven-year-long Justice Department and Securities and Exchange Commission investigation.
“Walmart profited from rapid international expansion, but in doing so chose not to take necessary steps to avoid corruption,” said Assistant Attorney General Brian A. Benczkowski in a statement. “In numerous instances, senior Walmart employees knew of failures of its anti-corruption-related internal controls involving foreign subsidiaries, and yet Walmart failed for years to implement sufficient controls comporting with U.S. criminal laws.”
A company the size of Walmart should have known better and had the necessary compliance policies and procedures in place to prevent the FCPA violations from occurring in the first place.
While Walmart can undoubtedly absorb the financial and public relations hardships related to the FCPA violations, I would venture to say that such investigative and punitive actions would be the death nail for many small and midsize companies caught up in similar situations.
That’s why it remains utmost important for all U.S. companies to invest the necessary resources into their compliance oversight on the front end to prevent these types of regulatory violations from occurring in the first place, with FCPA compliance being part of that effort.
In addition, FCPA compliance must be enforced across the company, especially among overseas affiliates and subsidiaries where there are individuals who may think U.S. laws don’t apply or they have not been given the authority to oversee implementation of an effective compliance program.
To accomplish this, it’s essential that the highest management level within a U.S. company send a strongly worded statement to all overseas senior personnel, emphasizing that they will be held accountable for their actions if they should run counter to the principles of the company’s corporate governance. Routine compliance training, including FCPA, should be provided to overseas management and monitored by carefully selected individuals in those foreign offices. Lastly, an audit staff routinely should conduct real-world assessments of compliance practices and procedures.
Anything less than the abovementioned will put a U.S. company at risk.
Paul DiVecchio, principal of Boston-based DiVecchio & Associates, has provided export compliance consulting services to U.S. exporters for nearly 40 years. He may be reached by email at firstname.lastname@example.org.