FCPA background and main provisions
UK Bribery Act background and main provisions
Philippines local laws
Violation of laws - case studies
Enforcement actions
Legal and business issues
Compliance considerations
Q&A
The FCPA was enacted in 1977 following the Watergate Scandal in the U.S.
Purpose: To make it unlawful for certain classes of persons and entities to make
payments to foreign government officials to assist in obtaining or retaining business.
Two main provisions:
Anti-bribery provisions
Accountancy provisions
In general, prohibit: 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 or her official capacity or to secure any other improper
advantage in order to obtain or retain business.
Applicable to:
ISSUERS Any company that is registered or required to file periodic reports with the
SEC, including any officer, director, employees, or agents of these
companies.
DOMESTIC
CONCERNS
PERSONS
ACTING IN U.S.
TERRITORY
Any individual who is a U.S. citizen, national, or resident.
Any business organization that has its principal place of business in the
U.S .or which is organized in the U.S.
Foreign persons and foreign non-issuer entities that, either directly or
through an agent, engage in any act in furtherance of a corrupt payment
while in U.S. territory.
CORRUPT INTENT Must intend to induce the recipient to misuse his
official position. Merely offering or authorizing a bribe
triggers liability under FCPA but intent must be
present
ANYTHING OF VALUE No minimum threshold. May take many forms e.g.
cash, travel expenses, expensive gifts. What is
modest in the U.S. could be more significant in other
countries
FOREIGN OFFICIAL Includes not only traditional government officials, but
also employees of state owned or state controlled
entities. This also applies to companies that are not
wholly owned by the foreign government
ACT WILLFULLY To be criminally liable under FCPA must act “willfully”.
Generally construed to mean an act committed
voluntarily & purposefully with a bad purpose in mind
DIRECT OR INDIRECT Benefit or promise may be made directly by company
or its staff to a foreign official or indirectly if given or
received by an intermediary on behalf of the relevant
parties
FCPA
Components
ACT WILFULLY
ANYTHING
OF VALUE
FOREIGN OFFICIAL
Books and Records Provision
Requires issuers to “make and keep books, records, and accounts,
which, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the issuer.
Internal Controls Provision
Issuers must devise and maintain a system of internal accounting
controls sufficient to provide reasonable assurance over
management’s control, authority, and responsibility over the firm’s
assets.
Facilitating or Expediting payments or “Grease payments”
Narrow exception for “facilitating or expediting payments” made in furtherance of routine
governmental action that involves non-discretionary acts.
Defenses
Two affirmative defenses:
“Local Law” defense: Payment was lawful under written laws of the foreign
country
“Reasonable and bona fide business expenditure” defense: Money was
spent as part of demonstrating a product or performing a contractual obligation
ACCOUNTANCY
PROVISIONS
Criminal
Fine up to $5 million or twice the gain
or loss caused by the violation and/or
imprisonment up to 20 years.
Civil
Greater of pecuniary gain to the
defendant as a result of the violations
or $5,000 to $100,000 fine.
ANTI-BRIBERY
PROVISIONS
Criminal
Up to $2 million fine or twice the gain or
loss caused by the violation.
Civil
Up to $10,000 fine.
COMPANIES
ANTI-BRIBERY
PROVISIONS
Criminal
Up to $250,000 fine
or twice the gain or loss caused by
the violation and/or imprisonment
up to 5 years.
Civil
Up to $10,000 fine.
ACCOUNTANCY
PROVISIONS
Criminal
Up to $25 million fine or twice
the gain or loss caused by the
violation.
Civil
Greater of pecuniary gain to
the defendant as a result of
the violations or $50,000 to
$500,000 fine.
No specific statute of limitations
For anti-bribery provisions a 5 year limitations period applies but may be extended:
− In cases involving conspiracies,
− By a tolling agreement,
− By up to 3 years in order to obtain evidence from foreign countries.
For civil actions for penalties a 5 year limitations period also applies but may be
extended:
− Where SEC brings actions for equitable relief or disgorgement of ill-gotten gains
− By a tolling agreement,
− In cases involving foreign individuals, the limitations period is tolled for any period
during which the individuals are not found within the U.S.
Recent cases reveal that the SEC continues to try to stretch the boundaries of the
statutory period.
The UK Bribery Act is a new anti-corruption framework for UK and came into effect on 1
July 2011
Purpose: To replace and bring together current bribery laws dating back to 1889. Wide-
ranging, covering both public and private sector, with extraterritorial reach.
SECTION 1
OFFENCE OF “BRIBING”
SECTION 2
OFFENCE OF BEING “BRIBED”
SECTION 6
OFFENCE OF BRIBERY OF
FOREIGN PUBLIC OFFICIALS
SECTION 7 CORPORATE OFFENCE OF FAILING TO
PREVENT BRIBE
• To induce improper performance of a relevant function; or
• Knowing or believing that the acceptance of the advantage
would itself “constitute the improper performance of a
relevant function or activity” (i.e. that the person was not
allowed to accept the bribe)
• With the intention of performing a relevant function
improperly where that conduct in itself constitutes improper
performance of a relevant function
• As a reward for improper performance of a relevant function
• With the intention to influence the Foreign Public Official to
obtain or retain business or a business advantage
• Unless Foreign Public Official is permitted or required by
written law to be influenced by such an advantage
A company can be prosecuted if:
• A portion of the company’s business is “carried on” in the UK;
and
• An employee or an “associated person” bribes in connection
with the company’s business
Applicability
Applicable where:
• part of the offence takes place in the UK; or
• committed by a person with a “close connection to the UK” (e.g. A British citizen,
citizens of overseas British territories, UK residents, UK incorporated businesses); or
• committed by associated person acting on behalf of company that carries on portion
of its business in the UK.
Penalties
Individuals:
• On summary conviction – imprisonment up to 12 months and capped fine.
• On indictment – imprisonment up to 10 years and unlimited fine.
Companies: Unlimited fine.
Companies who put in place Adequate Procedures to prevent bribery will have an
absolute defence to liability under the new law.
Proportionality The procedures should be proportionate to
the risk a business faces and the size of that
business.
Risk assessment The requirement that a commercial
organisation assesses the nature and
extent of its exposure to potential external
and internal risks of bribery.
Communication (including training) Bribery prevention policies and procedures
should be clear, practical and accessible.
Monitoring and review Monitoring follows implementation; be
dynamic – identify and address new risks as
they emerge.
Due diligence Of associated persons who perform or will
perform services on behalf of an
organisation.
Top level commitment Top-level management should foster a
culture within the organisation in which
bribery is not acceptable.
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Principal anti-bribery laws
• Revised Penal Code (Act No 3815) (RPC) − Bribery may be direct (Article 210), indirect (Article 211), or qualified (Article 211-A)
• Anti-Graft and Corrupt Practices Act (Republic Act No 3019) (ACPA). Lists specific
corrupt practices punishable. Include, but are not limited to a public officer: − Directly or indirectly requesting or receiving any gift, present, share, percentage, or benefit, for himself or for
any other person, in connection with any contract or transaction between the Government and any other
party, wherein the public officer in his official capacity has to intervene under the law (Section 3(b))
− Directly or indirectly requesting or receiving any gift, present, or other pecuniary or material benefit, for
himself or for another, from any person for whom the public officer, in any manner or capacity, has secured or
obtained, or will secure or obtain, any Government permit or licence, in consideration for the help given or to
be given... (Section 3(c))
− Accepting or having any member of his family accept employment in a private enterprise which has pending
official business with him during the pendency thereof or within one year after its termination (Section 3(d))
Other anti-bribery statutes
• Code of Conduct and Ethical Standards for Public Officials and Employees (COCES) − Imposes a criminal liability for solicitation or acceptance of gifts by public officers “in the course of their official
duties or in connection with any operation being regulated by or any transaction which may be affected by the
functions of their office” (Section 6(d) in relation to Section 11)
• Republic Act No 6713
Penalties
• Violations of anti-bribery laws in Philippines are criminal offences
• RPC can impose penalties of 2-8 years imprisonment (and fine of not less than value
of the gift for direct bribery)
− Penalty for a law enforcer who refrains from arresting/prosecuting an offender
who has committed a crime is punishable by 20 – 40 years imprisonment (i.e. the
penalty which would have been imposed on the offender themselves)
• ACPA penalty for public officers is imprisonment for not less than 6 years and 1 month
nor more than 15 years, perpetual disqualification from public office and confiscation
of wealth gained from corrupt practices
• COCES punishes solicitation or acceptance of gifts by public officers with up to 5
years imprisonment and/or fine of PhP5,000.
Defenses
• Subject to general defenses and mitigation measures under Philippine law such as
burden of proof, justifying and mitigating circumstances
Gifts and value of service
• No de minimis exceptions in terms of gifts or value of services
• Presidential Decree No 46 makes it an offence for “public officials and employees to
receive, and for private persons to give, gifts on any occasion, including Christmas”
• Plaques of appreciation and simple tokens of gratitude or friendship without the
intention to corrupt public officials/employees are excluded
• Exception also applies for unsolicited gifts or presents of small or insignificant value
are offered or given as mere ordinary tokens of gratitude or friendship, according to
local customs or usage.
Smith & Wesson (July 2014) – Fine of $1.9 million
• Authorized and made improper payments to foreign officials while trying to win contracts to supply
firearm products to military and law enforcement overseas.
• Attracted new business by offering, authorizing, or making illegal payments or providing gifts for
foreign government officials in Pakistan, Indonesia and other countries.
Allianz SE (Dec 2012) – Fine of $12.3 million
• Allianz subsidiary in Indonesia used “special purpose accounts’” to make illegal payments to
foreign officials to win insurance contracts.
• Improper payments were disguised in invoices as “overriding commission” for an agent that was
not associated with the government insurance contracts or structured as overpayments which were
subsequently “reimbursed”.
Diageo (July 2011) – Fine of $16 million
• Made hundreds of illicit payments to foreign government officials to obtain lucrative sales and tax
benefits relating to whiskeys, including in India, Thailand and South Korea.
Sustainable Agroenergy Plc
• August 2013 UK’s SFO bought first prosecution under UK Bribery Act. Trial due to commence 6
October 2014
• 3 former directors of Sustainable Agro Energy, and an affiliated financial advisor charged in
connection with an alleged ponzi scheme in which the defendants allegedly tricked UK investors
into purchasing shares in biofuel-related investments in Cambodia.
• 3 of them are also charged with making and accepting a financial advantage contrary to section
1(1) and 2(1) of the Act.
GlaxoSmithKline
• The UK’s SFO has launched a formal criminal investigation into GSK and its “commercial
practices”, understood to mean allegations of foreign bribery. GSK is also being investigated in a
number of other countries.
Match fixing case
• Two Singaporean nationals were charged under sections 1 and 2 of the Act (regarding the giving
and receiving of bribes) as well as conspiracy to commit bribery. Two other individuals were
charged under section 1 for giving bribes, and with conspiracy to commit bribery. One was charged
solely for giving a bribe.
• No details are publically available as to the scale of the payments, nor exactly when the events in
question took place.
KNOW YOUR
BUSINESS
PARTNERS &
VENDORS
STRONG
COMPLIANCE
PROGRAM
THIRD
PARTIES
RISK
EXPOSURE MERGERS &
ACQUISITIONS
• Due diligence
• Periodic compliance audits
• Code of Conduct buy-in
• Jurisdictional
• Internal – sales, logistics,
marketing department etc.
• Competitors
• Compliance culture
• Successor liability
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RISK-TAILORED & RISK-BASED PRE-EXISTING COMPLIANCE PROGRAM
Designed and tailored to specific business operations, geographies and corruption risk. Include mechanisms to
prevent & detect violations, adequate financial & accounting processes and adequate system of internal controls.
Pre-acquisition FCPA due diligence and post-closing compliance integration procedures.
TONE AT THE MIDDLE AND BOTTOM DEFINES EFFECTIVENESS OF TONE AT THE TOP
Companies and management must “walk the talk” and ensure that the high-level commitment of management is
reinforced and implemented by middle managers and employees at all levels of the enterprise.
SENIOR EXECUTIVE RESPONSIBILITY FOR COMPLIANCE
Responsibility should be assigned to someone with appropriate authority in the enterprise, adequate autonomy
and independence from management and sufficient resources – people and money –to get the job done.
THIRD PARTY COMPLIANCE IS ESSENTIAL
Risk-based, include purposeful and intelligently designed auditing and monitoring. Should include proactive testing
on economically significant and higher risk transactions, periodic right-to-audit clauses, reinforcement training and
communications tailored to different countries’ needs and periodic certifications from relevant business partners.
CONTROLLED SUBSIDIARIES, AFFILIATES AND JVs MUST BE TAKEN INTO ACCOUNT
Companies are responsible and will be held accountable for improper activity by or on behalf of controlled
subsidiaries, affiliates and joint ventures.
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NON-CONTROLLED AFFILIATES, JVs, DISTRIBUTORS AND DEALERS SHOULD BE CONSIDERED
Non-controlled affiliates, joint ventures, distributors and dealers should be included in the risk assessment and
compliance plan. Companies must use “best efforts” to influence these entities to adopt internal controls and other
compliance program elements.
FINANCIALLY IMMATERIAL TRANSACTIONS AND PAYMENTS MAY GIVE RISE TO MATERIAL LIABILITY
Seemingly inconsequential amounts paid by or on a company’s behalf may give rise to exposure. Companies
must think carefully about potential touch points and where any form of value may be transferred i.e. gifts,
entertainment, charitable contributions, licenses, permits, customs.
DOES COMPLIANCE PROGRAM WORK?
The ultimate test for an FCPA compliance program is “Does it work?” and companies must be prepared to prove
this. Companies should take a common-sense and pragmatic approach to evaluating the adequacy of pre-
existing compliance program.
PRIVATE COMPANIES ALSO HAVE RISK EXPOSURE
Private companies need to adopt and maintain the same level of strong internal controls and other compliance
program elements in the area of anti-corruption.
EXPANSIVE JURISDICTIONAL CONCEPTS
Foreign nationals and companies need to ensure they are aware of the increasingly expansive jurisdictional
concepts of anti-corruption laws and that they are in compliance.