What is FCPA Compliance?

FCPA compliance is the process of adhering to the USA’s Foreign Corrupt Practices Act (FCPA), which is a federal law established to prohibit US citizens from bribing foreign officials. This act was formally enacted in 1977 by Congress in response to the revelation of illegal payments conducted by US-based entities.

According to the Securities and Exchange Commission (SEC), approximately $300 million was exchanged in illegal payments by US companies for bribing foreign officials to acquire favorable treatment.

Therefore, compliance with FCPA is essential to prohibit US-based subsidiaries and companies from gaining improper advantage by influencing the foreign official’s decisions in any way.

The ultimate motive of FCPA compliance training is to restore public assurance in the country’s business integrity by implementing a streamlined anti-corruption and anti-bribery policy.

Components of an FCPA Compliance Checklist

The legal framework of the FCPA compliance services is established to counter corrupt activities in international business operations by enforcing anti-bribery and anti-corruption policies. FCPA compliance is not just about adhering to legitimate standards, but it’s more about ensuring ethical business practices following Anti-bribery and corruption initiatives.

The essential components of an FCPA compliance checklist are:

Establishment of a Compliance Program

The foremost component of the checklist is to establish a compelling compliance program that spreads across all organizational levels. The FCPA compliance program must underscore the importance of anti-corruption and anti-bribery operations to promote ethical business operations.

Regular Risk Assessment 

The Foreign Corrupt Practices Act emphasizes regular risk assessment to combat evolving corruption threats. Businesses must scrutinize foreign financial dealings and international transactions by assessing the geographical, sector-specific, and intermediary risks.

Implementation of Internal Controls 

FCPA compliance calls for compelling internal controls that focus on setting clear guidelines, ensuring control consistency across all organizational levels, and establishing effective monitoring procedures. It must include regular training, whistleblower programs, audits, and third-party vetting.

Third-Party Due Diligence 

Under the FCPA compliance program, due diligence of third parties, including distributors, joint venture partners, and agents, must be prioritized. With this indirect compliance, violations can be significantly mitigated.

Integration of Automated Measures 

Through the integration of appropriate technological measures, companies can stimulate their compliance monitoring efforts, conduct accurate internal investigations, and automate due diligence procedures. Automated FCPA compliance software promotes credible workflow operations to stimulate anti-bribery operations.

Key Legislative Provisions of the FCPA Compliance Policy

The FCPA compliance legislation is overseen by the US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), both aiming to target illicit activities for acquiring favorable treatments. The two legislative provisions of this act are:

• Anti-Bribery Provisions: This provision covers the prevention of US entities engaging in corrupt operations conducted overseas. Under this provision, the companies are required to ensure rigorous corporate compliance programs that include monitoring agents who are susceptible to being involved with foreign entities.
• Accounting Provisions: The second most proficient provision of the FCPA compliance program is to maintain structured reports and sufficient internal control policies to ensure that all transactional activities are conducted through legitimate channels.

Considerations for FCPA Compliance Certification

The violation of FCPA compliance may lead to severe complications for the companies. Therefore, organizational entities must consider various risk factors when dealing with foreign officials.

Some industries and business activities carry more risk factors than others, which is why the identification of various risk factors prior to the organizational ventures is necessary. A few high-risk industries include resource extraction, IT, medical equipment, construction, pharmaceuticals, and defense sectors.

Furthermore, any official business dealing, such as business licensing, tax settlements, and planning consult, must be exposed to enhanced due diligence checks due to the inherent risk levels in them.

The FCPA programs must optimize the implementation of strict risk assessment measures against corrupt activities.

FCPA Compliance Program Best Practices

The Foreign Corrupt Practices Act program promotes extensive surveillance against illicit activities. Thereby, it is crucial for the companies to back their compliance measures with codified standards while including several regulatory measures:

• Comprehensive Due Diligence: FCPA compliance stresses strict due diligence screening measures against risk-prone entities. During this process, compliance officers must capture the key data, including names, addresses, and criminal background check analysis.
• Sanction Database Screening: US-based companies are required to screen the global sanction lists and must comply with OFAC sanctions alongside FCPA due diligence. This is to ensure that the examiners can capture external risk factors of entities that are restricted by government officials.
• PEP Monitoring: The Politically Exposed Persons (PEPs) and their close associates are most likely to be involved in bribery and corrupt activities. Thereby, ongoing monitoring of such entities against the government databases is critical to countering the facilitation of unauthorized activities.

Tips to Discover Violations of the FCPA Compliance Program

To discover the breaches of FCPA compliance programs, companies can streamline the identification of non-compliant activities through the following channels:

• Organizations can detect corrupt entities and activities through their personalized reporting mechanism, such as a whistleblower hotline. This allows the employees to anonymously share their concerns about illicit activities that may violate the FCPA guidelines.
• Companies can seamlessly uncover regulatory violations by regularly reviewing the travel, gift, and entertainment expenses of high-risk individuals to ensure anti-bribery and anti-corruption measures.
• Under the FCPA, a company or other commercial entity found guilty can be fined up to $2 million for each anti-bribery violation, while an individual may face a smaller but still significant punishment and even jail time.
• Individuals found guilty of violating the FCPA can face fines of up to $250,000 and imprisonment of up to 5 years.
• If a director, officer, or stockholder of the corporation violates this rule, they might face a fine of up to $100,000 and a potential jail sentence of five years.

Conclusion

The Foreign Corrupt Practices Act (FCPA) serves a crucial role in ensuring transparency across international trade while promoting ethical business ventures.

Companies complying with the act can contribute to minimizing the global corrupt operations by strongly adhering to its provisions.

This act ensures that businesses thoroughly examine the risk involved in joint ventures and foreign investment activities to significantly reduce bribery and corruption operations.