The Foreign Corrupt Practices Act (FCPA) is legislation that was enacted in 1977. It prevents the payment of bribes to foreign officials, which some companies may attempt to do to obtain or maintain business. Businesses must be aware of the key FCPA risks to avoid fines and legal issues. Organizations can do so by implementing a compliance program and choosing to screen for politically exposed persons online. For more information on screen for politically exposed persons online, visit the website.
What are key FCPA risks?
According to the United States Department of Justice, common red flags associated with third parties include:
- Cash payments to third parties
- Excessive commissions to agents or unusually large discounts to distributors
- Undocumented payments
- Third party “consulting agreements” with very vaguely described services
- The third party consultant is in a different industry than the consulting occurs
- The third party is related to or closely affiliated
- The third party became a part of the transaction at the direct request of the foreign official
- The third party is a shell of a business incorporated in an offshore jurisdiction
- The third party requests payments to offshore bank accounts
- Lavish or excessive gifts provided for a corrupt purpose to obtain some improper advantage or in violation of local law
How to reduce FCPA risks
Every American company conducting or seeking business overseas is subject to the FCPA. Businesses can reduce their FCPA risks by creating and implementing a compliance program to help combat corruption. Such programs should include a well-documented due diligence procedure that is tailored to their operations and the associated risks.
What to include in an FCPA compliance program
A well-designed and implemented compliance program should include the following items:
- A clear policy against corruption (and a formal, written commitment from senior management to abide by that policy)
- Policies, procedures, and a code of conduct for all employees and management
- Someone who is expressly responsible for overseeing and implementing the compliance program (ideally senior management)
- A regularly-conducted formal risk assessment
- Periodic anti-corruption compliance training for all relevant employees
- A regulated and documented due-diligence procedure on the company’s third-party business partners
Companies should also screen for politically exposed persons online regularly, as PEPs are more susceptible to being involved in bribery or corruption. Organizations that screen for politically exposed persons online should also screen any close business associate or family member of someone who has been designated as a PEP.
By applying the above tips, companies can limit their risk of being involved in corruption, bribery, or other illegal business activities when conducting business abroad.
Read a similar blog about screening solution here at this page.
