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Foreign Corrupt Practices Act: Leading Practices to Consider

Authored by Nina Gross in conjunction with ForThoughts: Some of the Leading Practices in FCPA Compliance.

Many organizations that are doing business overseas are potentially vulnerable to Foreign Corrupt Practices Act (FCPA) risk. More and more companies, both U.S. and non-U.S, are asking: What kind of compliance program do I need? What is missing from the program I have? Regardless of the type of company, certain leading practices can help mitigate risk and provide evidence of good faith effort that may ease government penalties should problems emerge.

Legal:

  • Work with your in-house counsel to address issues including:
  • Centralizing legal approval of agents*
  • Analyzing whether all agent relationships are captured by legal
  • Reviewing due diligence procedures and assist with approval of agents annually
  • Conducting due diligence on agents
  • Using consistent contracts
  • Embedding anticorruption clauses in all agent contracts and agreements
  • Embedding anticorruption clauses in all distributor contracts and agreements
  • Annually attesting to compliance of FCPA and anticorruption clauses obtained from agents

Accounting/Audit:

  • Perform FCPA risk assessment
    • Evaluate FCPA risk by country
    • Know and post red flags as part of audit program
    • Embed FCPA controls into 404 control infrastructure
    • Train teams so that they are knowledgeable of common vehicles for risk (promotional programs, donations, etc.)
  • General
    • Temper pressure to achieve results with ethical decision-making guidelines
    • Have FCPA response audit/legal team in place
  • Company programs
    • Determine whether effective whistleblower processes are in place
    • Confirm internal audit has specific FCPA risk assessments in place
    • Perform agent, distributor audits on a rotating basis
    • Conduct regular analysis of commission/finders fee payments
    • Make FCPA due diligence and analysis an integral part of acquisition checklist
  • Interview agents annually for FCPA compliance
  • Conduct periodic internal audit of entertainment expenses
  • Confirm Audit Committee discussion of commitment to FCPA compliance and agent exposure

Finance/Systems:

  • Charge one person with responsibility to monitor FCPA compliance (i.e. Chief Ethics Officer)
  • Track entertainment expenses for government employees
  • Set up a separate “facilitation payments” account and use it
  • Confirm government contracts can be segregated, identified, and tracked
  • Confirm contracts are competitively offered and processes not circumvented
  • Communicate allowable exceptions
  • Monitor charitable and political contributions
  • Confirm that commissions and bonuses are in expected and reasonable ranges
  • Scrutinize contracts and billings to help determine whether expected value is being received
  • Flag unusual payments, such as to offshore holding companies
  • Closely evaluate favorable or abnormal credit terms by competent and independent personnel

HR Compliance and Training:

  • Build anticorruption and FCPA guidelines into global ethics framework
  • Conduct local FCPA training and messaging at appropriate levels
  • Make FCPA-specific education packages available focused on areas and countries of largest risk
  • Confirm completion of effective sales force, controllership/finance, and senior management training
  • Consider prohibiting slush account or off-book transactions
  • Collect annual compliance attestations from employees
  • Cascade training to sales, legal, accounting, and country management

Return to ForThoughts: Some of the Leading Practices in FCPA Compliance.

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