The U.S. .Securities and Exchange Commission (“SEC”) and U.S. Department of Justice (“DOJ”) issued a long-delayed Foreign Corrupt Practices Act (“FCPA”) Resource Guide in November 2012. While the Guide was preceded by years of pressure to clarify the enforcement of the FCPA, it generally does little to break new ground as a matter of policy and is not legal precedent. The Guide functions best as a single-reference source of preexisting agency enforcement actions and opinion letters. In this regard, it is a useful resource for the long-held interpretations of the FCPA by the agencies tasked with enforcement and offers a single source for the ounce of prevention that may be worth a pound of cure. It is important that companies review the Guide to assess whether current compliance programs or measures will pass the watchful eye of the SEC or DOJ and for insight into how the agencies are likely to view future compliance issues and potential misconduct. With that in mind, one legal services firmed pulled together 12 important takeaways that can be drawn from the Guide. Read one per day or all at once.
Takeaway number eight is the Guide’s eight red flags to spot when dealing with third parties. Liability under the FCPA exists where payments are made while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly, to a foreign official. Needless to say, this can include payments made by third-party agents or business partners. What’s more, recent case law suggests that liability exists where there is “conscious avoidance” of whether a bribe will be paid or which particular foreign official it will go to. The eight red flags referenced in the Guide are the following:
- excessive commissions to third-party agents or consultants;
- unreasonably large discounts to third-party distributors;
- third party “consulting agreements” that include only vaguely described services;
- the third-party consultant is in a different line of business than that for which it has been engaged;
- the third party is related to or closely associated with the foreign official;
- the third party became part of the transaction at the express request or insistence of the foreign official;
- the third party is merely a shell company incorporated in an offshore jurisdiction; and
- the third party requests payment to offshore bank accounts.
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DOJ and SEC Resource Guide to the U.S. Foreign Corrupt Practices Act for more in-depth details on specific provisions.
12 Days of Christmas • to provide cultural background on why there are “12 Days of FCPA”