Providing an overview of the tools available to assist banks and financial institutions with meeting the requirements of the Foreign Corrupt Practices Act (FCPA) and, in particular, knowing the background of your international vendors or business partners. The United States Congress enacted the FCPA to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system.
Providing an overview of the tools available to assist banks and financial institutions with meeting the requirements of the Foreign Corrupt Practices Act (FCPA) and, in particular, knowing the background of your international vendors or business partners. The United States Congress enacted the FCPA to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system.
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Foreign Corrupt Practices Act
Banks and other financial institutions are required to meet a number of tough legal and regulatory requirements to reduce the extent to which the financial system can be used by criminals to launder the proceeds of their crime. An important requirement among these is the implementation of controls to ensure the prevention of bribery and corruption of foreign government officials for commercial advantage. The Foreign Corrupt Practices Act (FCPA) has had an enormous impact on the way American firms do business, both in the US and overseas.

The FCPA was enacted by the US Congress in 1998 after the United States and thirty-three other countries signed the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

The provisions of the FCPA make it unlawful for a U.S. person, and certain foreign issuers of securities, to make a corrupt payment to a foreign official for the purpose of obtaining or retaining business for or with, or directing business to, any person. The provisions also apply to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States. Foreign Corrupt Practices Act

In the past two decades, over 400 U.S. companies have admitted to the US Securities and Exchange Commission that they had made questionable or illegal payments in excess of $300 million to foreign government officials, politicians, and political parties. Several US firms have since been convicted in the criminal courts of having paid bribes to foreign officials and have suffered large fines as well as being banned from participating in US federal procurement programmes. In addition, employees and officers have gone to jail.

More recently, the UK financial services regulator, The Financial Services Authority, imposed a fine of £5.25m on Aon, the Insurance giant, for "failing to take reasonable care to establish and maintain effective systems and controls for countering the risks of bribery and corruption associated with making payments to "Overseas Third Parties" who assisted Aon in winning business from overseas clients, particularly in high risk jurisdictions."

Firms need to have controls to ensure that they know who their customers are (in particular if they are Politically Exposed Persons), firms need to know the details of the management and ownership of the entities with whom they do business, and they need to be comfortable that their business is not associated with criminals. The Sarbanes Oxley legislation also imposes requirements on firms to disclose instances of fraud as well as reporting annually on its systems of internal control, so compliance with Foreign Corrupt Practices Act helps ensure SOX compliance too.

In order to avoid criminal prosecutions and fines, many firms have implemented detailed compliance programs to prevent and to detect any improper payments by employees or agents, particularly those operating “in the field” in tough emerging markets, where competition and general business practice often mean that rules set at Head Office are difficult to implement in practice and managers may attempt to circumvent regulations to achieve a sale Particular controls include :
  • due diligence checks on third parties to establish their bona fides at the outset of the relationship but, very importantly, as the relationship continues;
  • committees with senior executive representation to oversee the risks of bribery and corruption, to receive periodic management information;
  • detailed training for staff; and
  • general monitoring of processes and controls by independent risk or Audit functions.
Any company not implementing comprehensive compliance processes and controls and, in particular, not actively examining the history of its business partners to determine past involvement in fraud or corruption, will have significant difficulties in being able to meet anti-bribery and corruption legislation and regulation. A slack approach to compliance may result in criminal investigations, regulatory fines, restriction of trade and even jail sentences. It is not worth not complying.

ForeignCorruptPracticesAct.co.uk gives you access to a wide range of advice, systems and materials which ensure that you can comply with FCPA requirements to the level expected of you by legislation and regulation. You can also find guidance to help you set up the processes, procedures and controls to mitigate the risks of you doing business with undesirable third parties. Remember, proper control means less chance of legal or regulatory challenge.
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