FCPA Compliance and Red Flags
In order to avoid the consequences of an FCPA violation, it is imperative for companies to enact and maintain detailed compliance policies aimed at the detection and prevention of unethical business practices. Given that there are a wide variety of corruption risks, it is important that a business educate its employees and management about the specific corruption risks relevant to their industry and the countries in which they conduct business. Employees, particularly management-level, should generally be required to undergo updated FCPA compliance training annually. Thorough training on these topics ensures that employees will be able to recognize red flags and understand their reporting responsibilities.
Additionally, a business should conduct an in-depth FCPA risk assessment on an annual basis to ensure strong compliance standards and improve areas of weakness. An effective assessment will include confirmation that internal whistleblowing systems are accessible, as well as ensuring that third-parties are also keeping up with enforcement. In order to maintain an effective compliance program, it is recommended that companies appoint an internal FCPA compliance officer in order to manage the program and ensure its functionality.
The implementation of a corporate compliance program is also imperative as it demonstrates the good faith efforts of the organization. By maintaining a compliance program and continually educating employees, an organization establishes evidence of good faith. This is taken into account if an individual within the corporation violates the FCPA despite the organization’s best efforts.
Recognizing a Possible FCPA Violation
Government-issued guidance has highlighted many different circumstances that may be viewed asindicative of a violation, including:
- Requests for unusually high compensation, commissions, or contingency fees
- Questionable reputation of a business partner or doing business in a country with a questionable reputation regarding corruption
- Inconsistencies in accounting records
- Refusal to agree to FCPA-related anti-corruption provisions within a contract
- Engaging in conduct prohibited by local law
- Unusual payments methods
- Promises of business by or from a government official
- Business partner that seems incapable of accomplishing the services offered
- Making political contributions
- Ties to a foreign government and public officials
- A government official’s suggestion to engage in business with a particular third party
Corporations and their employees may be subject to penalties due to a violation even if they had no actual knowledge of the corrupt payments. Since liability for a violation often turns on whether the circumstances should have put the organization on notice for possible corrupt activity, recognizing these red flags is critical in order to prevent unethical practices and avoid liability for violations.
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