1. Domestic bribery (private to public)
1.1 Legal framework
Multiple federal statutes in the United States prohibit bribery of federal officials in specific contexts, but the most important statute that most directly criminalizes federal public corruption is 18 U.S.C. § 201. Section 201 has two main subparts: Section 201(b) criminalizes the payment, offer and receipt of bribes, and § 201(c) prohibits the payment, offer and receipt of illegal “gratuity.” Violations of § 201(b) are punished more severely than violations of the anti-gratuities provision. Other federal and state statutes prohibit bribery of state and local government officials.
1.2 Definition of bribery
(a) Section 201(b)—Bribery
Section 201(b) proscribes the giving and receiving bribes. As to the giver, § 201(b) requires the prosecution to show that something of value was corruptly given, offered or promised, directly or indirectly, to a public official. As to the recipient, it requires the prosecution to show that something of value was corruptly demanded, sought, received, accepted, or agreed to be received or accepted by a public official. The intent required for the giver is the intent “to influence any official act,” whereas the intent required for the recipient is the intent to be “influenced in the performance of any official act.”
(b) Section 201(c)—Illegal Gratuity
Section 201(c) deals with illegal official “gratuity.” As to the giver,
§ 201(c) requires the prosecution to show that something of value was given, offered or promised to a public official. As to the recipient, it requires a showing that something of value was demanded, sought, received, accepted, or agreed to be received or accepted by a public official. Under § 201(c), the unlawful gratuity must be “for or because of any official act performed or to be performed by such public official.”
A key difference between the bribery and illegal gratuity sections is that bribery requires a specific intent “to influence” a particular official act (in the case of the giver), or “being influenced” in an official act (in the case of the recipient); however, illegal gratuity only requires that the unlawful gift be given or received “for or because of” any official act. Unlike illegal gratuity, which may be forward- or backward-looking at a past or future official act, bribery requires a specific intent to give or receive something of value in exchange for a future official act—in other words, a specific quid pro quo or direct nexus between the value given and a particular future act.
The bribery and gratuity offenses under § 201 do not require that an unlawful gift actually be paid, or even that the object of the unlawful gift be attainable. Section 201 prohibits conduct as soon as an offer (in the case of the giver) or an acceptance (in the case of the recipient) has occurred.
1.3 Definition of public official
Section 201 proscribes bribes and gratuities given or offered to, or received or requested by a public official. The term “public official” is defined to include any:
Member of Congress, Delegate, or Resident Commissioner, either before or after such official has qualified, or an officer or employee or person acting for or on behalf of the United States, or any department, agency or branch of Government thereof, including the District of Columbia, in any official function, under or by authority of any such department, agency, or branch of Government, or a juror. 18 U.S.C. § 201(a)(1).
The prohibitions of § 201 apply not only to current public officials, but also to any “person who has been selected to be a public official.” In other words, the statute extends to “any person who has been nominated or appointed to be a public official, or [who] has been officially informed that such person will be so nominated or appointed.” 18 U.S.C. § 201(a)(2).
The definition also establishes that § 201 is primarily focused on federal, rather The definition also establishes that § 201 is primarily focused on federal, rather than state or local public officials—although the US Supreme Court has held that § 201 may be used to prosecute corruption of state and local officials, and even private individuals, who administer federal programs and occupy “a position of public trust with official federal responsibilities.” Dixson v. United States, 465 U.S. 482, 496 (1984).
The definition of public official under § 201 precludes the statute’s use against purely private commercial bribery.
1.4 Consequences of bribery
As previously described, both the giving or offering, and the receiving of a bribe and gratuity are proscribed under § 201.
Section 201(b) (bribery) is punishable by up to 15 years’ imprisonment, a fine of USD 250,000 (USD 500,000 for organizations) or up to three times the value of the bribe, whichever is greater, and disqualification from holding any federal office.
Section 201(c) (illegal gratuity) is punishable by up to two years’ imprisonment and a fine of USD 250,000 (USD 500,000 for organizations).
1.5 Political contributions
Political contributions are not prohibited under § 201. Such contributions, being to an extent protected by the US Constitution, are generally permissible in the United States so long as they are made in conformity with the federal and states campaign finance laws and regulations applicable to political donations (for example, federal laws that impose limitations on how much individuals and organizations can donate to campaigns and political parties). Payments made as a quid pro quo for an official act would still be illegal, despite having been ostensibly made as a campaign contribution.
1.6 Limitations applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)
Section 201 does not expressly prohibit hospitality expenses, such as for gifts, meals or entertainment, incurred for public officials.
However, such expenditures may constitute “things of value” that, if given or received in order “to influence” any official act (bribery) or “for or because of” any official act (gratuity) may form the basis of criminal liability under § 201.
Under both the bribery and gratuity provisions of § 201, a “thing of value” is defined broadly, and it includes anything that has commercial value or subjective value to the recipient. Thus, the term encompasses not only cash, but also meals, travel, entertainment, other “in kind” gifts that have commercial value, and even gifts that have purely subjective value to the recipient. Often the key issue in determining whether such activities were permissible is whether the giver or the recipient acted with corrupt intent.
Further, although § 201 does not expressly prohibit hospitality expenses, other laws and regulations enacted at the federal, state and local government levels do limit how such expenditures may be provided to and accepted by public officials. For example, members of Congress are subject to regulations that govern their travel and receipt of gifts—the Rules of the House of Representatives and the Standing Rules of the Senate.
2. Domestic bribery (private to private)
2.1 Legal framework
Both the US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) are authorized to punish domestic bribery. The DOJ has used state laws, in combination with federal laws, such as the Travel Act, 18 U.S.C. § 1952, and mail and wire fraud statutes, 18 U.S.C. §§ 1341, 1343 and 1346, to criminally prosecute commercial bribes. The SEC can civilly punish domestic bribes that violate the SEC’s books and records and internal controls provisions (the “accounting provisions” – Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act). Additionally, for instances of wilful violation of the accounting provisions, the SEC can refer the case to the DOJ for criminal prosecution.
2.2 Definition of bribery
2.2.1 The Travel Act
The Travel Act is a federal statute that prohibits travel or use of the mails in interstate or foreign commerce with the intent to distribute the proceeds of any unlawful activity or to promote, manage, establish or carry on any unlawful activity, including violations of the US Foreign Corrupt Practices Act (FCPA) or state bribery laws.
As of 2016, commercial bribery is prohibited in some form in a majority of US states, and its definition in respective state statutes varies. Some states, such as California, focus on the actions of the recipient of the bribe;1 however, others, including most notably New York and Virginia, criminalize the actions of both the recipient and the person offering the bribe.2
In general, commercial bribery has been treated under state laws as a breach of a fiduciary duty and is defined as:
- giving or offering to give, directly or indirectly, anything of apparent present or prospective value to any private agent, employee or fiduciary, without the knowledge and consent of the principal or employer, with the intent to influence such agent’s, employee’s, or fiduciary’s action in relation to the principal’s or employer’s affairs. 3
2.2.2 Mail and wire fraud statutes and the accounting provisions
The federal mail and wire fraud statutes, 18 U.S.C. §§ 1341, 1343 and 1346, prohibit the use of mail and interstate wire communications to execute a “scheme or artifice to defraud” or deprive another of money or property, including the intangible right of “honest services.” In Skilling v. United States, the US Supreme Court held that the honest- services theory of fraud includes bribes and kickbacks paid to employees of private firms, but not more generalized efforts to defraud a company’s shareholders.4 Thus, the use of mail and wire communication in connection with commercial bribery can subject respective persons to prosecution for mail and wire fraud.
2.2.3 Accounting Provisions of the FCPA
In addition, under the FCPA’s accounting provisions, the SEC may pursue claims against publicly-traded companies for commercial bribery in the domestic context. As held by the Court in SEC v. FalconStor,5 the FCPA’s accounting provisions, which require publicly traded companies to keep accurate books and records and maintain adequate internal controls, also apply to domestic transactions. For both wilful and non-wilful violations of the accounting provisions, the SEC can pursue both individuals and issuers of registered securities or issuers that are required to file annual or other periodic reports with the SEC. These issuers include any entity whose securities trade on a United States exchange.
2.3 Consequences of bribery
The consequences of commercial bribery conduct vary by the prosecuting entity and the statute under which the bribe is punished. The SEC can only assess civil monetary fines, and any criminal charges, which can lead to both fines and imprisonment, must be brought by the DOJ.
Under the Travel Act, the mail and wire fraud statutes, and wilful violations of the accounting provisions of the FCPA, the DOJ can criminally punish the giver and recipient of a private bribe, those who are wilfully involved in creating misleading books and records, and related corporate entities. For individuals, the punishment can include both incarceration and fines. Corporate entities, both public and private, can be punished under either an agency theory or respondeat superior and assessed with fines and penalties. US law provides for broad corporate responsibility for the actions of its directors, agents, officers and employees. Corporate entities can be held responsible for the misconduct of employees or agents, even if senior management was uninvolved in or even unaware of the misconduct.
2.3.1 Travel Act (DOJ)
- Imprisonment for not more than: i) five years if the individual intended to distribute the proceeds of the bribe, or intended to promote or facilitate it; or ii) 20 years if the individual committed any crime of violence to further the bribe, with life imprisonment possible if the violent crime caused death.
- Not more than twice the gross gain from the bribe or not more than USD 250,000, whichever is greater
- Not more than twice the gross gain from the bribe or not more than USD 500,000, whichever is greater
2.3.2 Mail or Wire Fraud (DOJ)
- Imprisonment of not more than 20 years
- Not more than twice the gross gain from the bribe or not more than USD 250,000, whichever is greater
If the violation affects a financial institution or relates to a presidentially declared major disaster or emergency, the potential penalties increase to imprisonment up to 30 years or a fine up to USD 1 million, or both.
- Not more than twice the gross gain from the bribe or not more than USD 500,000, whichever is greater
2.3.3 Willful Accounting Violations (FCPA – DOJ)
- Imprisonment of not more than 20 years
- Not more than twice the gross gain from the bribe or not more than USD 5 million, whichever is greater
- Not more than twice the gross gain from the bribe or not more than USD 25 million, whichever is greater
2.3.4 Non-Willful Accounting Violations (FCPA – SEC)
- Not more than the gross gain of the bribe or USD 7,500 to USD 150,000, based on the egregiousness of the violation, whichever is greater
- Not more than the gross gain of the bribe or USD 75,000 to USD 725,000, based on the egregiousness of the violation, whichever is greater
2.4 Limitations applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)
There are no specific federal statutory limitations on hospitality expenses provided to private parties, and the provision of non-lavish meals, entertainment and gifts will likely not lead to prosecution.
Hospitality expenses that are provided as a quid pro quo intended to influence government officials, on the other hand, may expose the giver and recipient to criminal liability.
In general, the hallmarks of a proper hospitality expense are that it is:(a) given openly and transparently; (b) properly recorded in the giver’s books and records; (c) provided only to reflect gratitude or esteem and not to obtain business or an improper business advantage b; and (d) permitted under local law.
3. Corruption of foreign public officials
3.1 Legal framework
The corruption of foreign public officials is primarily prohibited under the Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. §§ 78dd-1, et seq. (the “FCPA”). The FCPA comprises anti-bribery and accounting provisions. In general, the FCPA’s anti-bribery provision prohibits offering to pay, paying, promising to pay, or authorizing the payment of money or anything of value to a foreign official in order to influence any act or decision of the foreign official in his official capacity, or to secure any other improper advantage in order to retain or obtain business. In addition, the FCPA’s accounting provisions require companies whose securities are listed in the United States to: (a) make and keep books and records that accurately and fairly reflect the transactions of the corporation; and (b) devise and maintain an adequate system of internal accounting controls.6
The DOJ and SEC are aggressive about prosecuting individuals and entities that engage in foreign corruption, including individuals and entities with limited connections to the United States. Recent activity by the DOJ – such as the issuance in 2015 of the memorandum regarding “Individual Accountability for Corporate Wrongdoing” issued by Deputy Attorney General Sally Yates (commonly referred to as the “Yates Memorandum”) emphasizing the need for individual prosecutions – indicates that the DOJ is intensifying its focus on individual liability for corruption and other criminal violations in the upcoming years. Under the Yates Memorandum, companies seeking cooperation credit from the Justice Department must provide all relevant information regarding the individuals responsible for the corporate misconduct. Providing such information is a threshold requirement to obtaining any cooperation credit.
On 5 April 2016, the DOJ announced the FCPA Pilot Program. The Pilot Program was intended to impart more concrete guidance and policy information on the benefits for companies in making voluntary self- disclosures to the DOJ of their own potentially corrupt conduct in FCPA cases. The Pilot Program is applicable to organizations that voluntarily self-disclose or cooperate in FCPA matters during the first year after it was introduced. The Pilot Program will be re-evaluated and may be made permanent after this initial trial period
The Pilot Program provides credit in FCPA matters “above and beyond any fine reduction provided for under the [United States] Sentencing Guidelines.” That credit may affect the type of disposition, the reduction in fine, or the determination of the need for a monitor.
More specifically, the Pilot Program provides for the possibility of a declination or a 50% reduction off the bottom end of the Sentencing Guidelines fine range for companies that voluntarily self- disclose, fully cooperate, and engage in timely and appropriate remediation.
However, “to receive this additional credit under the pilot program, organizations must meet the standards described [in the Pilot Program], which are more exacting than those required under the Sentencing Guidelines.” For example, the Pilot Program requires: self- disclosure on a timely basis of all facts relevant to the wrongdoing at issue, including all facts related to involvement in the criminal activity by the corporation’s officers, employees and agents; proactive rather than reactive cooperation; and disclosure of the locations in which overseas documents were found and identification of individuals who found them. To the extent consistent with the attorney-client privilege, the Pilot Program also requires that all relevant facts gathered during an internal investigation be attributed to specific sources. For companies that earn cooperation and remediation credit but do not voluntarily self-disclose, the Pilot Program provides for a maximum 25% reduction off the bottom of the Sentencing Guidelines fine range.
3.2 Definition of corruption of foreign public official
Bribery provisions of the FCPA
As previously stated, the FCPA prohibits US “issuers” – meaning those companies with a class of securities registered pursuant to section 12 or that are required to file reports under section 15(d) of Securities Exchange Act of 1934 – and any officer, director, employee, or agent or any stockholder thereof acting on behalf of such issuer, as well as US individuals (citizen or resident), and companies incorporated or having their principal place of business in the United States, and certain non-US entities and individuals from:
(a) Making a payment, offer or promise (or the authorization of a payment, offer or promise) of
(b) Anything of value – This is defined broadly and has no minimum value, threshold or materiality, and includes, though not limited to, the following:
- Cash or the equivalent (including gift cards)
- Travel, meals, lodging, shopping, lavish entertainment expenses or hospitality
- Benefits and favours (e.g., special access to a government agency)
- Performing services that would otherwise have to be paid for or purchased
- Contracts or other business opportunities awarded to a company in which a public official has an ownership or other beneficial interest.
- Employment or consultancy opportunities
- Charitable donations
- Political contributions
- Medical, educational or living expenses
(c) Directly or indirectly, “knowing” that some or all of the payment will be paid – knowledge under the statute can be established when a person is aware that there is a high probability that a bribe is occurring. Actual knowledge need not be proved.
(d) To a “Foreign Public Official” – as defined in the succeeding section
(e) Corruptly: To induce an official to misuse his or her public position to improperly direct business to a company or individual. There must be an “evil motive” or purpose/intent to wrongfully influence the recipient to “misuse” his or her official position to wrongfully direct, obtain or retain business.
(f) For the purpose of obtaining or retaining business. This includes the following:
- Payments made to obtain a specific contract or piece of business
- Payments made to secure any other business advantage, including reductions in taxes, duties or fees, favourable treatment with respect to, or avoidance of, customs duties, securing grants of, or exemptions from otherwise applicable permits or licensing requirements, etc
Affirmative defenses to the Anti-Bribery Provisions of the FCPA
- Payment is lawful under the written laws and regulations of the country.
- Payment is a reasonable and bona fide expenditure directly related to: (a) the promotion of products or services; or (b) the execution of a contract with a foreign government or agency.
- The foreign public official who receives the unlawful payment is not usually exposed to criminal liability under the FCPA. However, the DOJ has occasionally prosecuted foreign public officials who received unlawful payments under other anti- corruption statutes
3.3 Definition of foreign public official
A “Foreign Public Official” is any officer or employee of a foreign government or any department, agency or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency or instrumentality, or for or on behalf of any such public international organization.
The definition of a Foreign Public Official is very broad and encompasses any officer or employee of: any government entity (e.g., mayor, governor, legislator); any department, instrumentality or agency of the government; any political party; any person acting in any official capacity for such organization; or candidates for political office. Importantly, employees of foreign state-owned enterprises (SOEs) are also considered Foreign Public Officials for the purposes of the FCPA.
3.4 Consequences of Corruption of foreign public officials
(a) For the individuals involved
- Violation of the anti-bribery provisions of the FCPA can be punished by a fine of up to USD 250,000 and imprisonment of up to five years for each violation
- Violation of the accounting provisions of FCPA can be punished by a fine of up to USD 5 million and imprisonment of up to 20 years.
(b) For the legal entity
- Violation of the FCPA anti-bribery provisions can be punished by a fine of up to USD 2 million per violation.
- Violation of the FCPA accounting provisions can be punished by a fine of up to USD 25 million per violation.
(c) In addition to the above-described criminal penalties, the SEC can assess additional civil penalties and require disgorgement of ill-gotten gains. These penalties can run into the hundreds of millions of dollars.
Despite the higher statutory maximum penalties for violations of the accounting provisions, in practice, violations of the anti-bribery provisions are usually perceived to be more egregious and are punished accordingly.
In addition to criminal penalties, legal entities and individuals can be subject to civil penalties of up to USD 16,000 per violation for violations of anti-bribery provisions. For violations of accounting provisions, the civil penalty ranges from USD 7,500 to USD 150,000 for individuals and from USD 75,000 to USD 725,000 for a company, based on the egregiousness of a violation. Where a defendant has profited from a violation, SEC can obtain the equitable relief of disgorgement of ill-gotten gains and pre-judgment interest, which may also be significant.
3.5 Limitations applicable to hospitality expenses (travel, gifts, meals, entertainment, among others)
Hospitality expenses – including meals, travel, lodging, entertainment and modest gifts – may give rise to liability under the FCPA. Reasonable expenses include expenses directly related to the promotion or demonstration of products or services, or the execution or performance of a contract with a foreign government or its agency. Lavish hospitalities, repeated instances of meals and entertainment, and a lack of transparency surrounding a gift can be viewed as improper payments under the FCPA.
4. Facilitation payments
The FCPA’s anti-bribery provision contains a narrow exception for facilitation payments made in furtherance of routine governmental action. Also known as “grease payments,” facilitation payments are made to expedite non-discretionary acts by a government official. Facilitation payments differ from standard bribes because they are made to secure goods or services, such as the issuance of a license, visa, police protection, or power and water supply, to which the payment maker is already entitled. In contrast, typical bribes are paid to influence the outcome of a governmental decision over which a public official can exercise his or her discretion. Routine governmental action does not include a decision to award new business or any acts that would constitute misuse of an official’s office.
The practical value of the exception, however, is quite limited. US enforcement authorities are highly sceptical of facilitation payments and have often pursued anti-bribery charges against defendants who claim the exception. Furthermore, to avoid violating the FCPA’s accounting provisions, parties who intend to invoke the exception must accurately record their payments (e.g., listing them as “facilitation payments”) on their books and records, thereby exposing them to liability in other jurisdictions where such payments are not permitted. As a result, reliance on the facilitation payment exception is not advisable. Very few defendants have successfully invoked the exception to avoid liability under the FCPA.
5. Compliance program
5.1 Value of a compliance program to mitigate/eliminate criminal liability for companies
The implementation and effectiveness of a company’s compliance program plays a significant role in mitigating, or possibly even avoiding, corporate criminal liability under US Sentencing Guidelines (USSG or the “Guidelines”) and the DOJ’s Principles of Federal Prosecution of Business Organizations (the “Principles”), as well as the FCPA Pilot Program. In 1991, the US Sentencing Commission (the “Commission”) promulgated sentencing guidelines for business organizations, which instructed federal judges to impose significant monetary penalties on companies convicted of criminal offenses.
Despite a 2005 US Supreme Court ruling concluding that judges are not bound by the Guidelines when imposing sentences, they remain the primary framework for resolving criminal corporate enforcement actions and imposing related fines and are, thus, highly informative for anticipating the consequences of a US anti-bribery enforcement action against a company. As with all sentencing guidelines, the Commission identified factors that would increase or reduce an organization’s culpability. Among these factors is the “existence of an effective compliance and ethics program” at the time of the offense. (See USSG §8C2.5(f).) Section §8B2.1 of the Guidelines details the seven components of what it views as an effective compliance program. These seven elements are described by the Commission as the minimum requirements for establishing a compliance program that promotes an organizational culture of ethical conduct. Thus, they direct companies, at a minimum, to do the following:
- Establish standards and procedures to prevent and detect criminal conduct.
- Ensure that leaders understand and oversee the compliance program in order to verify its effectiveness and the adequacy of support for the program and that specific individuals are vested with the authority and responsibility to implement the program.
- Use reasonable efforts to deny leadership positions to people who have engaged in illegal activities or other misconduct.
- Periodically communicate the standards and procedures of the compliance program to employees, and conduct effective training programs.
- Monitor and audit employee conduct, evaluate the effectiveness of the compliance program and maintain reporting mechanisms for employees who become aware of misconduct.
- Provide incentives for employees to perform in accordance with the compliance program, and impose disciplinary measures against personnel who engage in criminal conduct.
- Respond quickly to allegations of criminal conduct and modify aspects of the compliance program, if necessary.
An amendment gave corporations an incentive to create a direct line of communication between compliance personnel and the board of directors. In particular, it provides that if compliance personnel have “express authority” to communicate with the board about potential criminal misconduct “promptly,” as well as the status of the compliance program at least annually, a corporation found guilty of wrongdoing may still receive credit for having an effective compliance program even if high level personnel were involved. (See USSG Commentary to §8C2.5(f); Application Note 11.)
Additional guidance on US law enforcement’s expectations for an effective compliance program can be found in the DOJ’s “Principles of Federal Prosecution of Business Organizations.” First issued in 1999, and now codified in the US Attorneys’ Manual, these principles serve as a guide for federal prosecutors when deciding whether to criminally charge a corporation for the misconduct of its employees. The fifth of these factors instructs prosecutors to consider whether the company attempted to prevent the wrongdoing through a well- designed and pre-existing compliance program. Under the Principles, prosecutors are counselled to determine whether a company’s compliance program is “merely a ‘paper program’” or a program “designed, implemented, reviewed and revised, as appropriate in an effective manner.” When read together, the USSG and the Principles provide guidance on compliance program minimum standards to which companies subject to US legal and regulatory jurisdiction should adhere.
In November 2012, the DOJ and SEC jointly released “A Resource Guide to the US Foreign Corrupt Practices Act” (the “Guidance”), which addresses a variety of topics related to the agencies’ enforcement of the FCPA. Significantly, it also provides direction on the “hallmarks” of an effective anti-corruption compliance program and the best practices that the DOJ and the SEC expect companies to put in place when addressing their anti- corruption risks. The Guidance instructs companies that when assessing an anti-corruption compliance program, the agencies ask three key questions: (1) Is the program well designed? (2) Is it applied in good faith? (3) Does it work? This third criterion is now a critical part of the DOJ and SEC’s assessment of whether to reward a company for its compliance program, and companies are now expected to provide tangible proof in response to this question.
Significantly, in November 2015 the DOJ hired a compliance consultant who is now evaluating the existence and effectiveness of compliance programs for companies under investigation.
In February 2017, the Fraud Section of the DOJ published its Evaluation of Corporate Compliance Programs (Evaluation Guidance)7 which represents the latest in a series of important communications by the Fraud Section outlining the DOJ’s expectations for effective corporate compliance programs. The document includes 11 key compliance program evaluation topics, with a corresponding set of “common questions” that the DOJ considers relevant in assessing compliance programs within the context of a criminal investigation.
5.2 Absence of a compliance program as a criminal offense
As previously described, the presence of an effective compliance program can be a powerful mitigating factor in the prosecution calculus, and the absence of a compliance program may be an aggravating factor in an anti-corruption prosecution. There is no general criminal statute requiring corporations to have an anti- corruption compliance program, although certain regulated industries may have specific statutory compliance program requirements (e.g., the Bank Secrecy Act requires financial institutions to develop and implement anti-money laundering compliance programs).
5.3 Elements of a compliance program
Five elements of an effective compliance program
When viewed together, the abovementioned pronouncements from US enforcement authorities on corporate compliance program expectations all touch upon a set of key issues that can be boiled down to five essential elements: leadership, risk assessment, standards and controls, training and communication, and oversight. These five elements serve as the organizing principles for the way
Baker McKenzie counsels our clients in the area of corporate compliance and can be practically and effectively applied to any compliance area. If a company’s compliance program effectively covers these five elements, in addition to meeting US compliance program expectations, it will likely meet the wide variety of law enforcement expectations around the world.
- Leadership. A successful compliance program must consist of well-articulated internal policies and procedures and be built on a solid foundation of ethics endorsed by the board of directors. This includes having a high-ranking compliance officer in place who is provided adequate authority and resources to manage the program on a day-to-day basis. The compliance officer must also have the ear of the board of directors and report to the board at least annually.
- Risk Assessment. A company should annually evaluate its risks, including the degree to which company employees conduct business with government officials, its use of third- party agents and intermediaries, the regulatory enforcement of the regions where it operates, and the impact of recent business developments such as new joint ventures, corporate affiliations, or expansion into markets that could create additional risk.
- Standards and Controls. In addition to a code of business conduct, companies should have detailed written policies and clear procedures and protocols for ensuring those policies are implemented.
- Training and Communication. Keys to effective training programs include live, annual training for high-risk personnel; tailoring programs to each country where a company operates; and frequent updates to programs that demonstrate an understanding of evolving trends and new legislation. The manner in which the company communicates the importance of its program, internally and externally, will also be an important consideration.
- Monitoring, Auditing, Testing and Response. In order to ensure that a corporate compliance program is not “merely a ‘paper program,’” enforcement authorities expect companies to monitor, audit and test their compliance program to verify its effectiveness and prove to enforcement authorities that the program does, indeed, work.
6. Regulator with jurisdiction to prosecute corruption
The DOJ is the primary prosecutorial body with authority to prosecute corruption on the federal level in the United States. Within the DOJ, a specialized FCPA unit under the Fraud Section handles foreign corruption cases, now more frequently with the assistance of a US Attorney’s Office. Meanwhile, the Public Integrity Section and US Attorney’s Offices handle domestic corruption cases. Each of the 94 US Attorney’s Offices has authority to bring federal criminal charges regarding corruption with a nexus to their district. The SEC has broad civil authority to address civil violations of the FCPA involving publicly listed companies. Finally, state and local prosecutors can bring criminal charges for violations of state anti-corruption laws.
1 Cal. Penal Code § 641.3. – Back
2 N.Y. Penal Law, Art. 180; Va. Code Ann. § 18.2-444.
3 Mississippi Code § 97-9-10.
4 Skilling v. United States, 561 U.S. 358 (2010). – Back
5 SEC v. FalconStor Software, Inc., Civil Action No. CV 12-3200 (E.D.N.Y. June 27, 2012).- Back
6 Conduct that violates the FCPA may also violate other statutes or regulations. Moreover, payments to foreign government officials and intermediaries may violate these other laws even if all of the elements of an FCPA violation are not present. The US government has relied upon the Travel Act, anti-money laundering statutes, mail and wire fraud statutes, and other certification, reporting, and tax regulations to prosecute individuals and entities involved in foreign corruption.- Back
7 https://www.justice.gov/criminal-fraud/page/file/937501/download – Back