New Biden Administration Push for Aggressive FCPA Enforcement Highlights Need for Revised Due Diligence and Risk Monitoring
21 April 2021 12:00
- Risk & Compliance
- Nexis Diligence™
- Risk Management
- Due Diligence
- Ultimate Beneficial Ownership
Less than three months after taking office, the Biden administration is already pushing bold enforcement of the Foreign Corrupt Practices Act (FCPA). Several FCPA-related investigations in 2021 have sent a clear signal: Anti-bribery and corruption compliance remains a top priority under the new leadership. Companies should take notice and enhance their due diligence and risk monitoring processes to mitigate potential compliance risks.
New momentum to fight bribery and corruption
After a record-breaking $7.84 billion in global corruption-related penalties werelevied by the Justice Department’s (DOJ) fraud section in 2020 , the current administration has allocated further resources to its foreign bribery unit. Since the start of this presidential term in late January 2021, the administration has extended the Justice Department’s high-profile foreign bribery unit to unprecedented levels, now comprising 39 prosecutors. In light of previous pledges made by President Biden during the 2020 campaign, experts anticipate further impetus for FCPA enforcements. The Denver Business Journal identified three key areas:
- Large corporate settlement amounts: Although the overall number of FCPA cases has remained relatively stable over the past years, settlement amounts have skyrocketed. This trend does not seem to be at an end just yet.
- Cross-border and cross-jurisdictional FCPA enforcement: Recent years have seen an increase in multilateral cooperation to combat corruption and bribery. These coordinated efforts seem to be a continued priority for the DOJ and the SEC.
- Expanded individual enforcement: Going forth, individual accountability for white-collar crimes, such as money laundering or bribing foreign officials, will continue to play an important role in the FCPA enforcement framework.
FCPA-related investigations have not stopped in Q1 of 2021. So far, three companies have settled FCPA-related investigations this year, agreeing to more than $120 million in penalties. With more than 110 companies linked to ongoing FCPA-related investigations, more enforcement actions can be expected.
Why thorough due diligence is essential for mitigating corruption and bribery compliance risks
Costs associated with an FCPA investigation can be substantial, even before any potential findings are established. In order to mitigate financial, regulatory or reputational fallout,a robust FCPA compliance program should constitute three essential components:
- A sound and transparent internal compliance program: FCPA compliance requires organisations establish a sound corporate code of conduct both for employees, business partners and other third-party actors to adhere to anti-bribery and corruption compliance.
- Thorough due diligence on third parties and transactions: Third party due diligence and on-going monitoring has to be an integral part of any FCPA compliance procedure and help mitigating risks related to many enforcement actions.
- A rapid response system for possible violations: A full understanding of the scope of any potentially occurring violation as well as an adequate and prompt action plan to counter further risks has to be established.
Against the backdrop of a steady increase of FCPA enforcements, companies should revisit and strengthen their third-party due diligence and risk monitoring to identify potential financial, regulatory, and reputational risks. Is your risk management process ready to be put to a test?
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