FCPA enforcement overseasIt can take a long time for the Supreme Court to decide on something. It makes sense, since it’s  the highest court in the US and it’s the one that sets the case law all the other courts must follow. The final decisions of the Court have long-lasting and rippling effects. One decision the Supreme Court made not too far back significantly changed how FCPA violations can be enforced. In the past, these actions primarily targeted US businesses. But now, a decision the Court has made opens overseas officials up for action as well.

For a long time, the FCPA was designed to go after those who pay bribes, not those who receive them. The reason is obvious, in that the person receiving the bribe is often a foreign official with no duty to comply with US law. However, there are some cases where officials can get around this by charging them via the SEC, through a charge known as conspiracy to violate the FCPA.

The One-Sided Nature of the FCPA

FCPA enforcement has always been limited by the fact that the reach of the law only extends so far. In a traditional domestic bribery case, both the individual who offered the bribe as well as the person who accepts it are charged. However, under FCPA enforcement, it’s usually the company that pays the money for the bribe that faces the charge. The agencies that enforce the FCPA have attempted to work around this by charging foreign officials with conspiracy to violate the FCPA. This was developed by three important cases:

  • United States v. Castle – This is the case that set the precedent for foreign officials not being charged under the FCPA. Castle involved two American and two Canadian officials involved in a bribery scheme. The Canadian officials argued they couldn’t be charged, and the Supreme Court agreed.
  • Ocasio v. United States – The Ocasio case, ironically, has little to do with the FCPA. Instead, it was a case regarding police officers receiving kickbacks from garage owners for referring business to them. Under federal law at the time, the officers could be charged, while the shop owners could not, as they were not directly involved in the bribery. Instead, prosecutors used the Hobbs Act, an act designed to prevent public officials from using their power for monetary gain. They charged them with conspiracy to violate the Hobbs Act rather than charging them with a direct violation of the act. In the end, the garage owners were charged not for accepting bribes, but instead, for helping the officers violate the Hobbs Act.
  • Evans v. United States –  The Evans case again is not one which directly involved the FCPA. Instead, it also involved the Hobbs Act. The important lesson learned from this case was that someone using their power as an official for the government to gain unjust enrichment is the same thing as taking a bribe.

By using the precedents set in both Ocasio and Evans, those who investigate FCPA violations were able to establish two rules. One, an official using their power to gain money is the same thing as accepting a bribe. Two, even when someone can’t be charged with a violation of an act, they may still be charged with conspiracy to violate an act. The Ocasio decision in 2015 would lay the groundwork which would allow the DOJ to charge the receivers of bribes in an FCPA case.

What This Means for Your Overseas Clients

These decisions are important to your overseas clients because, in the event that you’re dealing with a particularly aggressive client who is demanding payments that may violate the FCPA, this could make them party to an FCPA action. Specifically, say a company has a make-or-break contract with a foreign official. That foreign official then demands a “processing fee” to put through the contract and they demand it be paid directly to them. If the firm pays this fee, then learns it was a violation, they could disclose the violation and actions could be taken against the more culpable party—aka, the official demanding the bribe.

Keep in mind this wouldn’t be a charge under the FCPA. Instead, it would be a separate conspiracy charge that would follow DOJ guidelines regarding those charges. The Ocasio decision only came through in 2015 and hasn’t gone into wide enforcement as of yet. Currently, most of the individuals being prosecuted for violating the FCPA are the bribe givers and not the ones who accept the bribe. However, this interpretation of the law opens up the potential for enforcement against foreign business partners. As such, when dealing with foreign officials, you must:

  • Document any payments – Some legal costs and paperwork fees are to be expected when dealing with foreign officials, but those facilitation fees are easy to turn into bribes. To keep a close eye on this, any time a payment is demanded for processing reasons, it must be documented.
  • Do not make direct personal payments – If a fee is needed to process paperwork, it should be paid to the company or government entity in question. No personal payments should be made to government officials and your firm needs a clear policy documenting this.
  • Inform your employees and agents – It can be hard for an employee or agent dealing with a particularly aggressive official, which is why you need to ensure they’re aware not just of the risk to your firm, but of the risks that official is taking as well. Keep employees informed as to how conspiracy to violate the FCPA can cross national borders through regular compliance updates.

AC Global Risk offers the technology you need to minimize your risk when there’s a high chance of FCPA violations. While officials are working hard to minimize the risk of shakedowns entirely, your firm needs to do its due diligence in managing it as well, which is where RRA can act as a useful tool. For more information, contact us.

Imaage Source | Flickr CC user angela n.

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