RiskWatch: FCPA Enforcement Trends & Developments


17-minute listen

Ann Sultan and Alexandra Beaulieu of the law firm Miller & Chevalier came on the show to discuss recent enforcement developments and trends concerning the Foreign Corrupt Practices Act. In our discussion, we cover a number of important issues such as why the extractives sector continues to pose challenges for FCPA compliance, what red flags to look for when vetting a business partner overseas, and the need to go beyond a surface level screening of third-parties / business partners before entering into a relationship. You can find a link to a recent review of FCPA enforcement trends and developments published by the firm here

Key Highlights:

06:17 – A starting point for companies building a third-party risk program.

A good starting point is conducting a risk assessment and ensuring that the right compliance and legal stakeholders understand the company’s key areas of risk. From there, companies can start mapping their key risk areas to where they have existing controls and where there are areas of improvement in order to mitigate the highest-level risk.

06:56 – Why the extractives sector remains high-risk.

The extractives industry inherently is at a higher-risk for bribery and corruption for several reasons. First, the extractives sector is highly-regulated and often includes state-ownership of resources, which means that companies have more potential touchpoints with foreign government officials at multiple levels. Second, the extractives industry deals with the extraction of a country’s natural resources, necessitating the need to obtain licenses and permits. Obtaining these licenses and permits requires going through various government processes and is a potential touchpoint for bribery to occur in order to secure those items.  Thirdly, projects in the extractives industry are worth large amounts of money and tend to involve a bidding process. When the value of a project is so high, people’s judgement can become clouded as they see the cost of engaging in corruption as minor compared to the upside of winning a contract. Lastly, extractives projects overseas can be very complex and can result in companies needing business partners to assist with certain aspects of their operations. Each business partner / third-party that the company works with presents a potential liability for bribery and corruption risk.

09:05 – Key risk indicators when vetting third-parties and the need for enhanced due diligence

At a high level, you want to ensure that the third-party is equipped and has the expertise to help you and are not just being retained because of their connections or unique access to a senior government official or government decision maker. Secondly, you want to ensure that the third-party has a solid reputation and past performance in their industry as well as a willingness to sign up to the company’s anti-bribery and corruption and codes of conduct clauses. Lastly, you should vet the background of the third-party for any key risk indicators, even if they are not related to bribery and corruption because it could pose a significant reputational risk to the company or be an indicator of an unfruitful business relationship.

15:32 – Nearshoring and the need to remain vigilant on third-party risk

Even as companies nearshore their operations and supply chains, there is still the potential to run afoul of the FCPA. Anytime a company is operating in a foreign jurisdiction, the general FCPA concerns remain the same. Additionally, as companies move their operations to another country, they should educate themselves on the particular government touchpoints and corruption risks posed by the new jurisdiction as these present potential missteps.

Fill out the contact form to connect with our team of experts at Vcheck to learn more about how we can vet third-parties and business partners around the world to support your enhanced due diligence process. 

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