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Time to step up with a timely resource from the regulators

The OECD’s recent report on Australia's implementation and enforcement of foreign bribery laws states there are “serious concerns that overall enforcement of the foreign bribery offence to date has been extremely low”.

Insights Time to step up with a timely resource from the regulators
Wednesday, 28 November 2012

Given this comment and the pressure it puts on Australian authorities to step up their enforcement activities in relation to bribery of foreign public officials, now is the time for Australian companies to take appropriate action to help make sure they stay out of trouble.

With many aspects of Australia’s foreign bribery laws being similar in nature to the US Foreign Corrupt Practices Act (“FCPA”), this makes the long awaited release of “A Resource Guide to the U.S. Foreign Corrupt Practices Act” quite timely. The Guide, prepared jointly by the Criminal Division of the US Department of Justice (DOJ) and Enforcement Division of the US Securities and Exchange Commission (SEC), highlights the following topics:

  • The FCPA’s anti-bribery and accounting provisions

  • The definition of a “foreign official”

  • What constitute proper and improper gifts, travel and entertainment expenses

  • The nature of facilitating payments

  • How successor liability applies in the mergers and acquisitions context

  • The hallmarks of an effective corporate compliance program

  • The different types of civil and criminal resolutions available in the FCPA context.

Although 120 pages in length, the Guide provides real-life and hypothetical examples with practical suggestions for compliance, which is a crucial element in helping a company understand what they can do to avoid falling foul of a regulator.

Hallmarks of Effective Compliance Programs
Whilst the Guide states that both the DOJ and SEC have no “formulaic requirements” regarding compliance programs and that one size does not fit all, they will assess such a program on three basic questions:

  • Is the compliance program well designed?

  • Is it being applied in good faith?

  • Does it work?

When considering the design of a compliance program, the Guide mentions that although focused on the FCPA, a company should also incorporate the requirements of the anti-corruption laws of other countries. Accordingly, the Guide specifies the following as key elements:

  • Code of conduct and compliance policies and procedures

  • Oversight, autonomy and resources

  • Risk assessment

  • Training and continuing advice

  • Incentives and disciplinary measures

  • Confidential reporting and internal investigation

  • Continuous improvement: Periodic testing and review  

  • Mergers and acquisitions: Pre-acquisition due diligence and post-acquisition integration

The Guide highlights that both DOJ and SEC understand that “no compliance program can ever prevent all criminal activity by a corporation’s employees” but when deciding whether a violation of the FCPA has occurred, they may decline to pursue charges based on the company’s effective compliance program, or may even reward a company for its program. To highlight this, the Guide lists the example of “a financial institution’s real estate transactions with a government agency in China” and that through the financial institution’s robust compliance program, DOJ and SEC declined to take enforcement action against it. 

Based on information provided in the example, we know the financial institution to be Morgan Stanley. We have previously analysed the Morgan Stanley case in detail in our Forensics Matters Publication.

To learn more about how we assist corporates with their anti-corruption risk management and compliance frameworks, click here.