Webcast: FCPA Trends in the Emerging Markets of Asia ......Jan 12, 2021 · FCPA Top 10: Enforcement Actions – 2019 and 2020 Resolutions Top the Charts * The DOJ imposed a USD 2.315

January 12, 2021

F. Joseph Warin Kelly S. Austin Joel M. CohenBenno Schwarz Patrick F. StokesOliver D. Welch

Webcast: FCPA Trends in the Emerging Markets of Asia, Russia, Latin America and Africa11th Annual Webcast

MCLE Certificate Information

MCLE Certificate Information

• Most participants should anticipate receiving their certificate of attendance in four weeks following the webcast.

• All questions regarding MCLE Information should be directed to Victoria Chan at +1 650-849-5378 or [email protected].

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Presenters

F. Joseph Warin

PartnerWashington, D.C. OfficeTel: +1.202.887.3609Fax: [email protected]

Benno Schwarz

PartnerMunich OfficeTel: +49.89.1893.3210Fax: [email protected]

Joel M. Cohen

PartnerNew York OfficeTel: +1.212.351.2664Fax: [email protected]

Kelly S. Austin

PartnerHong Kong OfficeTel: +852.2214.3788Fax: [email protected]

Patrick F. Stokes

PartnerWashington, D.C. OfficeTel: +1.202.955.8504Fax: [email protected]

Oliver D. Welch

PartnerHong Kong OfficeTel: +852.2214.3716Fax: [email protected]

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Topics to Be Discussed

• An Overview of FCPA Enforcement• Emerging Market Anti-Corruption Enforcement and Trends:

o Chinao Indiao Latin America o Africao Russia

• Global Trends and Risk Mitigation Strategies• Appendix: The FCPA

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An Overview of FCPA Enforcement

5

FCPA Enforcement Actions Per Year (2009-2020)

0

5

10

15

20

25

30

35

40

45

50

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

26

48

23

11

1917

10

21

29

22

35

21

14

2625

12

89

10

32

10

1719

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Number of FCPA Enforcement Actions Per Year

DOJ Actions

SEC Actions

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Number of FCPA Enforcement Actions by Country (1978 to Present*)

* Minimum six enforcement actions.

Business conduct in China remains the largest source of FCPA actions in the history of the statute.

6 6 6 6 6 6 7 7 7 7 7 7 8 8 8 8 9 9 10 10 10 10 10 10 10 11 11 12 12 13 13 13 13 14 14 15 15 15 15 17 18 18 18 1821 22 23 24

3135 35

39 39

47 49 51

64

75

109

0

20

40

60

80

100

120

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Enforcement of the FCPA: Criminal Penalties

$0

$500,000,000

$1,000,000,000

$1,500,000,000

$2,000,000,000

$2,500,000,000

$3,000,000,000

2014 2015 2016 2017 2018 2019 2020

Total Value of Corporate FCPA Monetary Resolutions (2014 – 2020)

Highest ever in the history of the FCPA

Anti-Bribery Provisions• Corporations: USD 2 million fine or twice the pecuniary gain or loss.• Individuals: Up to 5 years’ imprisonment, and a USD 250,000 fine or twice the pecuniary gain or loss.

Accounting Provisions• Corporations: Criminal penalties up to a USD 25 million fine or twice the pecuniary gain or loss.• Individuals: Up to 20 years’ imprisonment, and a USD 5 million fine or twice the pecuniary gain or loss.

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FCPA Top 10: Enforcement Actions – 2019 and 2020 Resolutions Top the Charts

* The DOJ imposed a USD 2.315 billion criminal fine, USD 1.263 billion of which went to the DOJ, with the remaining amount paid to the SEC, and other enforcement authorities in the UK,Singapore and Hong Kong. The SEC required Goldman Sachs to pay a USD 400 million civil penalty and disgorgement of USD 606.3 million, with the disgorgement amount paid to theGovernment of Malaysia and 1MDB.** Siemens’s U.S. FCPA resolutions were coordinated with a €395 million (USD 569 million) anti-corruption settlement with the Munich Public Prosecutor.*** The combined amount of U.S., Dutch, and Swedish financial penalties is USD 965.6 million.**** BAE pleaded guilty to non-FCPA conspiracy charges of making false statements and filing false export licenses, but the alleged false statements concerned the existence of the company’sFCPA compliance program, and the publicly reported conduct concerned alleged corrupt payments to foreign officials.

No. Company Total Resolution DOJ Component SEC Component Date

1 Goldman Sachs* USD 1,663,088,000 USD 1,263,088,000 USD 400,000,000 10/22/2020

2 Ericsson USD 1,060,570,432 USD 520,650,432 USD 539,920,000 12/06/2019

3 Mobile TeleSystems USD 850,000,000 USD 750,000,000 USD 100,000,000 3/6/2019

4 Siemens AG** USD 800,000,000 USD 450,000,000 USD 350,000,000 12/15/2008

5 Alstom S.A. USD 772,290,000 USD 772,290,000 -- 12/22/2014

6 KBR/Halliburton USD 579,000,000 USD 402,000,000 USD 177,000,000 2/11/2009

7 Teva USD 519,000,000 USD 283,000,000 USD 236,000,000 12/22/2016

8 Telia*** USD 483,103,972 USD 274,603,972 USD 208,500,000 9/21/2017

9 Och-Ziff USD 412,000,000 USD 213,000,000 USD 199,000,000 9/29/2016

10 BAE Systems**** USD 400,000,000 USD 400,000,000 -- 2/4/2010

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Global Dimension of Enforcement Actions

Company Total U.S. Resolution Non-U.S. Resolution

Goldman Sachs USD 1,663,088,000Goldman Sachs agreed to pay over USD 3 billion to U.S. government bodies and foreign authorities in countries including the United Kingdom, Singapore, Hong Kong and Malaysia.

Siemens AG USD 800,000,000 Siemens’s U.S. FCPA resolutions were coordinated with a €395 million (USD 569 million) anti-corruption settlement with the Munich Public Prosecutor.

Telia Company AB USD 483,000,000 The total combined amount of United States, Dutch, and Swedish penalties was USD 965.8 million.

Airbus SE USD 294,488,085 Airbus’s total sanctions, paid to United States, United Kingdom, and French authorities, totaled around USD 4 billion.

Société Générale S.A. USD 292,800,000While the DOJ assessed the full USD 585 million penalty against SocGen,approximately half of it (USD 292.8 million) was paid to the French regulator, Parquet National Financier and credited against the U.S. fine.

In addition to record-setting monetary penalties in the U.S., several companies also have paid significant fines to non-U.S. enforcers.

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Corruption Trends: Asia, Russia, Latin America, and Africa

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China

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China: Market Characteristics

Sources: Worldometers, China Population 2020 (December 30, 2020) http://www.worldometers.info/world-population/china-population/; Associated Press, China trade surplus hits record $75B as Nov exports soar (December 30, 2020) https://apnews.com/article/business-global-trade-coronavirus-pandemic-china-united-states-76b934a5c6729de4466fc6ba89b4dcb2#:~:text=China's%20global%20trade%20surplus%20for,gained%2033%25%20to%20%2414.6%20billion; International Monetary Fund, People's Republic of China at a Glance, https://www.imf.org/en/Countries/CHN; https://tradingeconomics.com/china/inflation-cpi; Trading Economics, China Exports (December 30, 2020) https://tradingeconomics.com/china/exports; Asia Times, China’s foreign investment up in first nine months (December 30, 2020) https://asiatimes.com/2020/11/chinas-foreign-investment-up-in-first-nine-months/.

Estimated population of China in 2020. Median age of 38.4.

1.4 billion

China’s annual foreign trade surplus through November 2020.

USD 460 billion

Percentage increase in China’s exports from a year ago.

~2% Estimated GDP growth in 2020, a 4.1% decrease from 2019.

21.1%

China’s projected inflation for 2021.1.9%

Foreign direct investment into China through September 2020, a 2.5% increase from September 2019.

USD 103.26billion

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China: Corruption Landscape

China ranks 80th out of 198 countries in Transparency International’s latest Corruption Perceptions Index, a seven-spot increase from last year’s rankings.

According to World Bank’s Global GovernanceIndicators, China improved from the 36th

percentile in 2008 to the 43rd percentile in 2019on “control of corruption.”

More than 1.5 million officials have been disciplined over the past eight years as part of President Xi Jinping’s anti-corruption crackdown. Since January 1, 2020:

117,698

100,323Number of officials disciplined by CCDI in China for violations of the “Eight Rules” (including embezzlement, bribery, abuse of power, misappropriation, dereliction of duty, and malpractice).

Number of cases investigated by CCDI in China for violations of the “Eight Rules.”

Sources: Transparency International, Corruption Perceptions Index 2019 (December 30, 2020) https://www.transparency.org/en/cpi/2019/results/chn; Worldwide Governance Indicators Project (December 30, 2020) https://info.worldbank.org/governance/wgi/; China Anti-Corruption, http://www.cnzglz.com/?news/4109 (December 30, 2020) http://www.cnzglz.com/?news/4109.

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China: National Legislative Developments

Amendments to the PRC Criminal LawIn December 2020, China’s National People’s Congress passed amendments to the Criminal Law of the People’s Republic of China. The amendments will become effective on March 1, 2021. Key amendments include the following:

• The amendment to Article 164 raised the criminal penalty for private individuals (“non-state functionaries”) convicted of commercial bribery involving very large sums to imprisonment for 10 years to life. This amendment places punishments for non-state functionaries on par with those for government officials found guilty of similar crimes.

• Article 334.1 added a new criminal offense for illegally collecting human genetic resources (such as human tissues and cells) or illegally transporting or mailing human genetic resources abroad. In October 2020, China passed the Biosecurity Law, which lays out the requirements relating to the collection and use of human genetic resources and the administrative penalties for breaching these requirements.

• Article 142.1 codified the prohibition against fabricating records and statistics in connection with drug registrations.

15Source: National People’s Congress, 中华人民共和国刑法修正案(十一) (December 26, 2020)http://npc.people.com.cn/n1/2020/1227/c14576-31980014.html.

China: National Legislative Developments

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Unreliable Entity List – China’s response to U.S. sanctions on Chinese companiesIn September 2020, China’s Ministry of Commerce (“MOFCOM”) created an “Unreliable Entity List” as a counterpoint to U.S. and international sanctions against the PRC. Inclusion on the list comes with a variety of consequences.

• Chinese authorities may add foreign entities to the list for: (1) “endangering national sovereignty, security or development interests of China”; or (2) “suspending normal transactions with” or “applying discriminatory measures against” a Chinese entity which “violates normal market transaction principles and causes serious damage to the legitimate rights or interests” of the Chinese entity.

• The open-ended list of potential sanctions include prohibitions or restrictions on China-related imports or exports, investment in China, entry into China, permit to work or stay in China, as well as fines and “other necessary measures.” No entity has been added to the list to date.

Key takeaway: Multinationals operating in China must now contend with a far-reaching domestic sanctions regime. Monitor political developments closely and ensure your compliance program accounts for PRC sanctions and trade control laws.

Sources: MOFCOM, Provisions on the Unreliable Entity List (September 19, 2020) http://www.mofcom.gov.cn/article/b/fwzl/202009/20200903002593.shtml (in Chinese), http://english.mofcom.gov.cn/article/policyrelease/questions/202009/20200903002580.shtml (the official English translation); Export Control Law (October 17, 2020) http://www.npc.gov.cn/npc/c30834/202010/cf4e0455f6424a38b5aecf8001712c43.shtml (in Chinese),

In October 2020, the National People’s Congress passed the Export Control Law, establishing China’s first comprehensive export control regime.

China: Local Legislative Developments

Shanghai’s Focus on Commercial Bribery and Compliance Programs

Key TakeawaysMultinational companies with operations in Shanghai should be aware of local legislative developments, in additional to national legislative developments. Local regulations, such as Shanghai’s Anti-Unfair Competition Regulations, may impose additional regulatory requirements on companies.

******

The regulations reflect a trend to hold companies accountable for the depth and breadth of their compliance programs.

Sources: Shanghai Municipal People’s Congress, 上海市人民代表大会常务委员会公告第49号 (October 28, 2020) http://www.spcsc.sh.cn/n8347/n8467/u1ai222523.html.

• Accepting bribes (no monetary threshold) for commercial advantage directly or indirectly is prohibited;

• Companies are “required” to strengthen internal controls relating to anti-unfair competition, and “encouraged” to establish anti-corruption compliance programs;

• In anti-corruption enforcement proceedings, the government should assess whether the companies in question have an anti-corruption compliance program; and

• The government should publish guidelines with respect to anti-unfair competition enforcement actions.

Shanghai Municipal People’s Congress amended its Anti-Unfair Competition Regulations in October 2020, effective on January 1, 2021. Key provisions for companies operating in Shanghai include:

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China: Domestic Enforcement Highlights High-Risk Sectors

Local enforcement actions in 2020 highlight risks in the Chinese energy and finance sectors.

Sources: SCMP, Corruption in China: deputy head of energy agency Liu Baohua under investigation (December 30, 2020)https://www.scmp.com/news/china/politics/article/3105931/corruption-china-deputy-head-energy-agency-liu-baohua-under; Caixin Global, Former top CNPC Executive ComesUnder Graft Probe (December 30, 2020) https://www.caixinglobal.com/2020-11-05/former-top-cnpc-executive-comes-under-graft-probe-101623179.html; Reuters, China’s HengfengBank ex-chairman Cai sentenced to death with two-year reprieve (December 30, 2020) https://www.reuters.com/article/us-china-crime-hengfeng-idUSKBN27M0LO; Caixin Global,Dismissed Policy Bank Official Involved in Bribery (December 30, 2020) https://www.caixinglobal.com/2020-12-07/dismissed-policy-bank-official-involved-in-bribery-101636646.html; Caixin Global, Former Chongqing Securities Inspection Chief Comes Under Investigation (December 30, 2020) https://www.caixinglobal.com/2020-12-05/former-chongqing-securities-inspection-chief-comes-under-investigation-101635916.html; Washington Post, Former Head of China State Asset Firm Sentenced to Death (January 10, 2021)https://www.washingtonpost.com/world/asia_pacific/former-head-of-china-state-asset-firm-sentenced-to-death/2021/01/05/075ea892-4f46-11eb-a1f5-fdaf28cfca90_story.html.

• In October, enforcement authorities announced acorruption probe into Liu Baohua, the former deputydirector of China’s National EnergyAdministration.

• In November, China’s anti-graft watchdogannounced an investigation into Shen Diancheng, aformer executive at China National PetroleumCorporation.

• In December, authorities announced two high-profileanti-corruption investigations of officials in thefinancial sector in China’s Chongqing province:Jiang Bin, a former official of the Export-ImportBank of China and Mao Bihua, the former partysecretary and director of the Chongqing division ofthe China Securities Regulatory Commission.

• Also in December, the Shanghai anti-graft watchdogannounced an investigation into Xu Zhen, formerChairman of Shanghai Clearing House.

• In November, the former chairman of HengfengBank, Cai Guohua, received a suspended deathsentence for corruption, embezzlement, briberyand illegal loan issuance, with illicit gainsallegedly amounting to RMB 10.3 billion (~USD1.45 billion).

• In January 2021, Lai Xiaomin, the former head ofChina Huarong Asset Management Co., Ltd., wassentenced to death for bribery, embezzlement, andbigamy. He allegedly collected or sought to collectbribes totaling RMB 1.79 billion (~USD 277million). This is one of the harshest punishmentsfor corruption-related convictions imposed byChina in recent years.

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Key Takeaways Energy and Finance sectors are highly nationalized

and subject to extensive regulatory oversight. Heavily scrutinize transactions with state-owned

banks, such as loans or permits.

China: Enforcement Trend – Industry Alert

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In 2020, the Chinese government has implemented policy changes and launched nationwide campaigns targeting the healthcare industry as part of its anti-bribery and anti-corruption efforts:• In August 2020, the Chinese government rolled out a nationwide campaign to combat

impropriety in the medical sales and services industry. • According to an article published on the website of the Central Commission of Discipline

Inspection of the Chinese Communist Party, the campaign specifically targets the provision of kickbacks in the medical industry.

• Since August 2020, the Chinese government has carried out a series of public hospital audits to crack down on improper payments or other benefits disguised as donations and academic sponsorships, including speaker fees.

• Doctors at certain public hospitals were reportedly required to produce records regarding speaker fees, including personal bank statements.

Sources: Sources: PharmaNet, 开始全国检查开票、医药代表销售、给回扣 (December 30, 2020) http://news.pharmnet.com.cn/news/2020/08/13/543865.html; Sohu, 【彻查】大三甲医院彻查讲课费，多家外企被卷入 (December 30, 2020) https://www.sohu.com/a/418190356_100092991.

China: Enforcement Trend – Industry Alert (cont’d)

On November 18, 2020, PRC authorities issued an “Operating Manual” to provincial authorities, directing them to implement a “credit rating system” for medical device and pharmaceutical manufacturers, distributors, logistics companies and company agents. • The manual prohibits kickbacks and other improper benefits to state-run healthcare facilities

and procurement agencies, as well as falsified documentation. • Manufacturers, distributors, or other companies found to have committed “Particularly Serious”

violations will be banned from transacting with public procurement agencies. • Companies must also sign a compliance declaration and report any judgment or fine relating to

(among other things) bribery to provincial authorities.

20Source: National Healthcare Security Administration Drug Pricing and Tender Procurement Guidance Center, Operating Manual on the Drug Pricing and Procurement Credit Rating 2020 (December 30, 2020) http://www.gov.cn/zhengce/zhengceku/2020-11/28/content_5565653.htm.

Key Takeaway: Medical device companies that rely on distributors should re-assess their due diligence and monitoring program to ensure that their distributors are qualified to participate in public tenders.

China: Enforcement Trend – Industry Alert (cont’d)

In December, Chinese authorities passed the “Administrative Measures (Trial) for the Registration of Medical Representatives.” These measures seek to reduce corruption involving marketing employees and representatives promoting products to Chinese healthcare practitioners (“HCPs”).

21Sources: National Medical Products Administration, Administrative Measures (Trial) for the Registration of Medical Representatives (December 30, 2020) https://www.nmpa.gov.cn/directory/web/nmpa/xxgk/ggtg/qtggtg/20200930163955170.html.

An individual who:(1) prepares academic programs

to promote medical products; (2) provides information on

medical products to HCPs; (3) assists HCPs in the use of

medical products; or (4) collects feedback on the use

of medical products, or information on the hospitals’ demand for these products.

Who is a medical representative? What is required? What conduct is prohibited?

Marketing Authorization Holders (“MAHs”) must

register their medical representatives with the China Pharmaceutical

Association.

Foreign MAHs are subject to the same

requirements, and must comply with these

provisions through their domestic agents.

Medical representatives are prohibited from:(1) Conducting promotional academic

activities without registration;(2) Conducting promotional academic

activities without consent from medical institutions;

(3) Directly providing donations, financial aids, or sponsorships to HCPs; and

(4) Collecting information on the quantities of drugs prescribed by HCPs.

International Enforcement: Cooperation from Chinese Regulators

2020 saw indicia of willingness on the part of the Chinese securities regulators to provide assistance and cooperate with regulators from other jurisdictions: • In December 2020, Hong Kong’s Financial Reporting Council (“FRC”), which oversees the auditing of

companies listed on the Hong Kong Stock Exchange (“HKEx”), announced that it received from the Supervision and Evaluation Bureau of China’s Finance Ministry the first batch of audit papers of Mainland Chinese companies listed on the HKEx. • This disclosure came pursuant to a memorandum of understanding signed between the FRC and the

Chinese Finance Ministry in 2019, after several years of discussions. • Previously, the Chinese government has barred audit papers from being handed over to regulators in other

jurisdictions on the basis that the papers fall within the broad scope of “state secrets.”• The Finance Ministry passed the papers to the FRC after obtaining clearances from the relevant Mainland

Chinese authorities, including the State Secrets Bureau. • To date, China continues to refuse to let representatives of the U.S. Public Company Accounting Oversight

Board review audits of Chinese companies that are listed on U.S. stock exchanges. • In December 2020, the SEC announced that China’s Luckin Coffee has agreed to pay a USD 180 million

penalty to settle accounting fraud charges. The SEC credited the Chinese Securities Regulatory Commission (“CSRC”) for cooperating with the investigation. The CSRC separately initiated an investigation in April 2020 into fraud allegations against Luckin Coffee.

22Sources: SCMP, ‘State secrets’ no more: Hong Kong regulator gains access to HKEX-listed Chinese firms’ audit papers in breakthrough (December 30, 2020) https://www.scmp.com/business/banking-finance/article/3113210/state-secrets-no-more-hong-kong-regulator-gains-access.

International Enforcement: Practical Challenges to Gathering Evidence in China

International Criminal Judicial Assistance Law (“ICJA Law”)China’s ICJA Law, which became effective in October 2018, governs mutual assistance between China and foreign countries in criminal cases. • The ICJA Law stipulates that no individual or entity within Chinese territory is allowed to provide foreign

countries with evidence, materials, or assistance in connection with criminal cases without the consent of the Chinese government.

• Approval from the government is required before any person or entity in China may comply with a foreign subpoena in relation to a criminal matter.

• The ICJA Law is ambiguous on several key points, including penalties for violations and the process for obtaining government permission to cooperate with foreign court orders. It is also unclear how the law would affect the operation of existing MLATs between China and other countries.

Sources: National People’s Congress, 中华人民共和国国际刑事司法协助法 (October 26, 2018)http://www.npc.gov.cn/zgrdw/npc/xinwen/2018-10/26/content_2064576.htm

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Key Takeaways:The ICJA Law may create competing legal obligations for MNCs with ties to China and other jurisdictions.

The ICJA Law may have unintended consequences in U.S. litigation involving MNCs, with U.S. authorities citing the ICJA Law as grounds for bypassing the existing MLAA regime to compel document production due to the uncertainty in how the law will be implemented.

International Enforcement: Practical Challenges to Gathering Evidence in China

State Secrets Laws• China has enacted a series of legislation to control the disclosure and transmission of data deemed

to be “state secrets.” Among other restrictions, the laws prohibit the transfer of state secrets out of Mainland China without approval from the Chinese government. The difficulty in navigating China’s state secrets regime lies in the fact that the laws provide only broadly-defined categories of information that constitutes “state secrets,” with the Chinese authorities maintaining broad discretion in the ultimate classification.

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http://www.npc.gov.cn/zgrdw/npc/xinwen/2018-10/26/content_2064576.htm; Central People’s Government, 中华人民共和国保守国家秘密法 (January 5, 2021) http://www.gov.cn/flfg/2010-04/30/content_1596420.htm; China Securities Regulatory Commission, 中华人民共和国证券法 (January 5, 2021) http://www.csrc.gov.cn/pub/tianjin/tjfzyd/tjjflfg/tjgjfl/201912/t20191231_368792.htm.

China Securities Laws• Article 177 of the newly amended China Securities

Law prohibits “foreign regulators from directly conducting investigations and collecting evidence” in China and restricts Chinese companies from sharing documents related to their securities activities with foreign regulators unless they obtain prior approval from the China Securities Regulatory Commission.

Key Takeaways• Always consult with PRC-qualified

counsel prior to collecting data or transferring data outside of China.

• Significant ambiguity continues to surround the blocking statute. Communicate about PRC law challenges with non-PRC regulators making information requests.

• Review your internal document storage protocols to ensure sensitive data is not inadvertently transferred outside of China without prior review.

International Enforcement: Additional Disclosure Measures from the U.S.

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In the final two months of 2020, the U.S. imposed new disclosure guidelines on issuers based in, or with the majority of their operations in, Mainland China (“China-based issuers”). These are the latest steps taken by the U.S. to tighten enforcement of securities laws against China-based issuers:

In November, the SEC issued disclosure guidance for China-based issuers, which sets out five broad categories of risks that China-based issuers must disclose as part of their SEC disclosure obligations. Among other risk categories, the SEC requires China-based issuers to disclose any limitations on the SEC’s ability to inspect the company’s audit papers, as well as risks relating to the quality of their financial statements.

In December, President Trump signed into law the Holding Foreign Companies Accountable Act, which would increase oversight of Chinese companies listed on U.S. stock markets. Among other measures, the law requires companies to disclose more information about ties to foreign governments and the Chinese Communist Party, and allows the Public Company Accounting Oversight Board to inspect the audit papers for audits of non-U.S. operations. The law also empowers the SEC to prohibit a company from trading in the U.S. if the company fails to comply with the disclosure requirements for three consecutive years.

Sources: SEC, Disclosure Considerations for China-Based Issuers (December 30, 2020) https://www.sec.gov/corpfin/disclosure-considerations-china-based-issuers; SCMP, Donald Trump signs law that could delist Chinese companies from US stock exchanges (December 30, 2020) https://www.scmp.com/news/china/article/3114603/donald-trump-signs-law-could-delist-chinese-companies-us-stock-exchanges; NY Times, Chinese Companies to Face More Scrutiny as Bill Clears House (December 30, 2020) https://www.nytimes.com/2020/12/02/business/economy/chinese-companies-to-face-more-scrutiny-as-bill-clears-house.html.

Lessons Learned from 2020 FCPA Enforcement Actions Involving China

Background: The company allegedly paid bribes to government officials in China to influence procurement decisions. Certain bribes were paid through a consultant with which the company entered into a fake consulting agreement for “campaign” work. In addition, Airbus China established a fund that was used to sponsor travel, leisure and entertainment activities attended by Chinese government officials. Lessons: (1) carefully scrutinize the use of consultants in high-risk jurisdictions; (2) implement a system of internal controls that ensures effective oversight of subsidiaries’ retention of and payments to third-party agents; (3) devote resources to monitor compliance with policies governing travel and entertainment benefits for government officials and SOEcustomers.

Background: Cardinal China acted as an exclusive distributor for a European skincare supplier, and managed a marketing fund on behalf of the supplier. The SEC alleged that Cardinal China allowed employees to use the marketing fund to, among other things, make payments to employees of state-owned retail outlets that had influence over purchasing decisions. The SEC alleged that Cardinal failed to properly assess the risks of the marketing fund, which led to a failure to apply critical accounting controls and properly train marketing employees. Lessons: (1) enhance oversight of employees’ interactions with third parties, such as marketing consultants; (2) conduct compliance risk assessments to identify control gaps and take remedial actions to improve internal controls; (3) ensure full visibility into activities of employees and third parties acting on behalf of the company.

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INDIA

Photo courtesy Ken Wieland

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India: Market Characteristics & COVID-19 Impact

Sources: Population Reference Bureau, India Rising (August 2018); UNCTAD, World Investment Report 2020 (2020); The World Bank: Gross Domestic Product 2019; Maryam Aslany, The Indian middle class, its size, and urban-rural variations (February 2019); IMF, World Economic Outlook (October, 2020); Photo Credits: sandeepachetan.com and Arian Zwegers.

Percentage of “Middle Class” in India. Projected to be the largest in the world by 2035.

28%

Domestic consumption as a percentage of India’s GDP.60%

Among Top 10 FDI Recipients in 2019.USD 51 BillionExpected contraction of the Indian economy in 2020-2021 –but expected to bounce back with 8.8% growth in 2021.

-10.3%

Second highest in confirmed COVID-19 cases but relatively low case mortality.

2nd

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India: Trends over the Last Decade v. Situation on the Ground

Sources: Transparency International, Corruption Perceptions Index (2010-2019) (The methodology changed in 2012); Transparency International, “Asia Pacific: Little to No Progress on Anti-Corruption” (29 January 2019); Transparency International, Global Corruption Barometer – Asia (2020); Worldwide Governance Indicators Source Data (2019); Deloitte, “India Corporate Fraud Perception Survey Edition IV” (2020).

India has improved on anti-corruption indexes over the last decade (2010-2019).

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Slow Progress on Anti-Corruption Initiatives:

• Despite legislation in 2014 establishing the Lokpal, India’s anti-corruption ombudsman, the members were not appointed until 2019 and the body did not become fully operationalized until March 2020.

• The prosecution wing of the Lokpal is yet to be operationalized.

• The Whistleblowers Protection Act, passed in 2014, has not yet come into force.

• No provisions in Indian law covering bribery of foreign officials.

India moved up 11 spots on TI’s Corruption Perception Index.91 >>> 80

India’s percentile rank for “control of corruption” improved between 2010 and 2019.

38.6 >>> 47.6

However, bribery and corruption continue to be a significant risk in India:

89%

of Indians polled as part of the 2020 Global Corruption Barometer survey believe

corruption in government is a “big problem”.

of Indian public service users paid bribes in the previous 12 month period– which is the highest rate

amongst Asian jurisdictions.

39%of survey respondents believe

business disruption caused by the COVID-19 pandemic could spur

fraud in India over the next 2 years.

80%

India: Prevention of Corruption Act – Tackling Demand and Supply

Key Provisions of the Prevention of Corruption Act, 1988 (“PCA”)A. Tackling the Demand Side§ 7 Prohibits Indian public servants from obtaining (or attempting to obtain) “any undue advantage” with the

intention of (or as a reward for) performing or causing performance of a public duty “improperly or dishonestly” or forbearing or causing forbearance to perform such duty. (Basic Prohibition).

§ 7A Prohibits any person (such as intermediaries, “fixers”) from accepting any “undue advantage” from anyone in order to cause a public servant to perform his public duties in an improper or dishonest manner.

§ 2(d) “Undue Advantage” is very broadly defined to include any gratification whatsoever other than legal remuneration.

B. Tackling the Supply Side§ 12 Prior to the 2018 Amendment, bribe giving could only be prosecuted under Section 12 of the PCA, as abetment to

acceptance of a bribe by a public servant. Now there is a specific provision prohibiting the giving or offering of abribe.

§ 8 Prohibits the giving of (or the promise to give) an “undue advantage” to anyone with the intent of inducing orrewarding the improper performance of a public duty by a public servant.

Note: Bribe giver will not be liable if (a) she can prove that she was compelled to give the bribe; and (b) she reports the bribe within 7 days to law enforcement authorities.

Pointers on the PCA:• Facilitation Payments: The amended PCA specifically clarifies that routine payments, or speed money, are also

prohibited. (§ 7)• Exception: Proving that one has been compelled to provide a bribe to a public servant will be difficult and may cause the

person involved to have to participate in lengthy legal proceedings. Do not rely on this exception.

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India: Prevention of Corruption Act – Tackling Demand and Supply (cont’d)

The PCA contains key obligations and potential liabilities for companies and their management.

§ 9 A commercial organization can be held liable “if any person associated with the commercial organisation gives orpromises to give any undue advantage to a public servant” with an intent to obtain or retain business or anyadvantage for that commercial organization.• Commercial organizations can be held liable for the actions of their employees, agents, service providers, and

professional advisers.

• A foreign parent company can be held liable for the actions of its Indian subsidiary.

Note: Commercial organizations can avoid liability for a bribe provided by a person associated with them bydemonstrating that the bribe was provided to the public servant despite the organization putting in place “adequateprocedures designed to prevent” it. The Indian government is expected to provide guidelines regarding suchprocedures.

Until the Indian government provides these guidelines, follow global best-practices.

§ 10 Managerial personnel of a commercial organization will be liable if the prosecution is able to establish that suchpersonnel consented to or connived with the person committing the offense under the PCA.

Managerial personnel may face up to 7 years’ imprisonment and/or monetary fines.

India’s Companies Act places additional obligations on companies and their management.§ 134(5) Requires directors of all companies to certify annually that “proper systems to ensure compliance with the

provisions of all applicable laws and that such systems were adequate and operating effectively” are in place.

§§ 134(8), 447 Significant penalties for fraud and non-compliance, which include fines and prison for “officers of the company.”

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India: Understand Your Disclosure Obligations

The disclosure clauses of the Companies Act continue to cause considerable confusion. Understanding your disclosure obligations is critical.WHO Must Disclose?• The Companies Act imposes an obligation on statutory auditors to report to the government instances of

fraud committed by the employees and officers of a company “within such time and in such manner as may be prescribed.”

WHAT Must Be Disclosed?

• The Companies Act defines “fraud” to include “any act, omission, concealment of any fact or abuse of position” committed by any person “with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders . . .”

• Guidance published by the Institute of Chartered Accountants in India urges auditors to consider reporting instances of bribery and corruption to the government under this clause. It is not clear, however, that bribery meets the definition of fraud absent an intent to gain an undue advantage from, or to injure the interests of, the company.

• Broadly speaking, for frauds involving INR 10M (~USD 150,000) or more, auditors must report the alleged fraud to the company, which is given 45 days to respond before the report and response are forwarded to the government. For frauds less than INR 10M, the auditors are required to notify the company’s board of directors. The board is then required to disclose details of the fraud, and the remedial action taken by the company in relation to fraud, in its annual report, which is filed with the Registrar of Companies.

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India: Evolving and Uncertain Disclosure Obligations

2020 brought additional disclosure obligations that may impact the way companies respond to compliance-related reports and conduct internal investigations.

Disclosure Obligations Relating to Whistleblower Reports

• Statutory auditors of Indian companies must disclose whether they have considered whistleblower reports made to the company. Companies, in turn, must disclose whistleblower reports to their auditors. This requirement comes into effect from FY 2020-21 and generally applies to companies listed in India and those with loans from public banks.

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Forensic Audit Disclosures

• In September 2020, SEBI determined that companies listed on Indian stock exchanges must disclose information regarding the initiation of any forensic audit—irrespective of materiality. While the rules, applicability, and reporting mechanisms await further clarification, under the decision, listed companies must disclose the following:o that it has initiated a forensic audit;

o the name of the entity initiating the forensic audit and reasons for initiating the audit; and

o the final forensic audit report (other than for forensic audits initiated by regulatory or enforcement agencies), along with any comments from company management.

Key Takeaways

More than ever, it is important to engage knowledgeable and trustworthy auditors. Auditors who are unfamiliar with the nuances or the disclosure requirements may be tempted to provide far more information than is required out of an abundance of caution. Conversely, seasoned auditors can help you tailor your audit activity and resulting disclosures to maintain confidentiality to the extent possible, while staying compliant with the applicable regulations.

India: A Federal System with Multiple, Intersecting Enforcement Agencies

An array of central- and state-level enforcement agencies increase the risk of dual enforcement. Understanding the agencies under which your organization is regulated is key.

Central Bureau of Investigation (“CBI”)

Serious Fraud Investigation Office (Companies Act)

State-Level Lokayuktas/Vigilance

Commissions

Central Vigilance Commission

State-Level Anti-Corruption Bureaux

Enforcement DirectorateFinancial Intelligence Unit –

Ministry of Finance

Central Lokpal

• Lokpal, the new federal anti-corruption watchdog, commenced operations in March 2020.

• Lokpal has broad powers to investigate any person (which includes legal entities) involved in aiding violations of the PCA, bribe giving or taking, or conspiracy related to any violation of the PCA.

• As of October 2020, Lokpal has received 1,496 complaints, and disposed of over 1,347 of these.

• According to Transparency International’s 2020 Global Barometer Survey, 73% of respondents in India thought their anti-corruption agency is doing well in the fight against corruption.

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India: Trend — Dip in Domestic Anti-Corruption Enforcement against Public Officials

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Have amendments to the PCA adversely impacted anti-corruption enforcement?

The 2018 Amendments• The PCA was amended in 2018 - the most significant amendments to

the PCA since its inception in 1988.• Under a new provision of the PCA (Section 17A) - Prior sanction of

the relevant government (state or central government or other competent authorities) is required before commencing an investigation under the PCA.

• Previously, only prosecution of public officials required pre-approval.

• Under the amendments, the relevant government authority has to “endeavour” to provide consent for both commencing investigation and prosecution within 3 months of receiving an approval request.

Key Enforcement Statistics• The decline in the number of cases registered under the PCA has

accelerated between 2017 and 2019.• At the end of 2018, 44 cases had not received government approval

to proceed, despite the request pending for over 3 months. The number for 2019 rose to 82 cases.

Sources: Annual Reports of the Central Vigilance Commission between 2015 and 2019

0

500

1000

1500

2015 2016 2017 2018 2019

Cases Registered under the PCA

Registered Cases

Number of Public Servants

Delays Result in Massive CBI BacklogThe dip in new cases has not affected the large backlog of pending investigations. At the end of 2019 (most recent statistics available):• 744 CBI cases have been pending for over

a year. 678 of these are PCA-related. • 25 corruption investigations have been

pending for over five years.• As of December 2019, 1,239 total

corruption investigations pending.

India: Local Enforcement Actions Continue

The decline in local enforcement numbers, however, does not necessarily reflect the situation on the ground, as evidenced by continued corruption scandals and investigations, as well as public perception that corruption remains a part of everyday life.

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• Media outlets reported that, in early 2020, the Enforcement Directorate re-started a long-running investigation into whether Indian Airlines’ 2006 purchase of 43 jets from Airbus SE, valued at ~USD 30 million, involved improper payments.

• Indian authorities recently charged the former CEO of ICICI Bank, Chanda Kochhar, and her husband with providing favorable bank loans to private companies, which in turn invested funds in businesses held by the couple.

Key Takeaways• The CBI does not need prior approval to commence a PCA

investigation into private parties. Look for the bureau to take the path of least resistance by increasing private sector enforcement.

• The CBI is not limited to cases under the PCA. Corrupt conduct may fall under other areas of CBI’s remit, such as bank fraud, forex violations, and import and export violations.

• Look for the CBI to significantly ramp up investigations once the COVID-19 pandemic wanes.

• The CBI has been active in other areas. In 2020, the Bureau registered 190 cases against private companies for alleged bank fraud. In total, the CBI alleges these companies siphoned off approximately USD 8.2 billion from dozens of Indian banks

“[A] large number of cases numbering around 800 were disposed of during the year gone by (2020) despite the huge challenges of the Covid-19 pandemic, which caused tremendous hurdles in the operations in various walks of life”

– CBI Spokesman RC Joshi (Jan. 1, 2020)

Sources: Bloomberg, India steps up Airbus Probe in wake of global bribery settlement (February 18, 2020)https://www.bloomberg.com/news/articles/2020-02-18/india-steps-up-airbus-probe-in-wake-of-global-bribery-settlement; Reuters, India court remands former ICICI bank CEO’s husnand in police custody (September 16, 2020) https://www.reuters.com/article/india-fraud/india-court-remands-former-icici-bank-ceos-husband-in-police-custody-idUSKBN25Z13L; Deccan Herald, CBI Concluded Investigation in Around 800 Cases in 2020: Agency Chief (January 1, 2020) https://www.deccanherald.com/national/cbi-concluded-investigation-in-around-800-cases-in-2020-agency-chief-934042.html

India: Lessons Learned from the Beam Suntory FCPA Resolution

• In October 2020, Beam – a Chicago-headquartered spirits maker, agreed to a USD 19.6 million settlement with the DOJ to resolve allegations that its Indian subsidiary (“Beam India”) made improper payments to Indian officials through third party promoters and distributors.

Key Takeaways• The case highlights the benefits of both

cooperation with DOJ/SEC, and coordinating a resolution strategy with both agencies.

• Enforcement authorities expect companies to perform robust pre-acquisition due diligence, particularly where targets operate in high-risk industries/markets.

• Even legal and compliance department employees need adequate training and monitoring. Enforcement authorities expect these employees to be knowledgeable and experienced, and to act as the company’s line of defense against corrupt conduct.

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• In exchange for the payments, the company received improved visibility of Beam products in state-owned depots and retail stores, and obtained operational registrations and licenses. The payments were subsequently falsely recorded in Beam India’s books and records.

• The DOJ noted that Beam, including employees in Beam’s legal department, failed to rectify inadequacies identified by external accounting and law firms, and instead attempted to prematurely terminate or limit compliance reviews in an effort to keep them from affecting an impending public offering of Beam securities.

• The DOJ also noted that Beam did not perform pre-acquisition due diligence on Beam India, which had a long history of making improper payments.

• The DOJ did not provide Beam with any credit for the penalty (USD 2 million) that it paid to the SEC as a part of its 2018 resolution arising from the same conduct since “Beam did not seek to coordinate a parallel resolution with the department”.

AFRICA

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Africa: Market Characteristics

Sources: Africa Population, Worldometer (Dec. 17, 2020); World Economic Outlook, International Monetary Fund (Oct. 2020); African Economic Outlook 2020, Supplement: Amid COVID-19, African Development Bank Group (June 22, 2020); Africa’s Pulse, Charting the Road to Recovery, World Bank Group (Oct. 22, 2020).

• At the start of 2020, Africa’s economic growth was estimated to be 3.9%.

• Led by the economies of Rwanda, Ethiopia, Cote d’Ivoire, Ghana, Tanzania and Benin, these countries were among the world’s 10 fastest growing economies.

• The COVID-19 pandemic reversed the robust growth projections expected at the start of 2020.

• Instead, economies in Sub-Saharan African countries are expected to decline by an aggregate -3.3% in 2020.

• Such a recession could result in losses between USD 115 billion and USD 189.7 billion.

• An economic recovery between 2.1% and 3.1% is anticipated in 2021, contingent on the availability and deployment of COVID-19 vaccines and governments’ ability to manage infection rates.

Estimated population is 1.35 billion, half of whom

will be under 25 years old by 2050

Growth is projected to be between 2.1 and 3.1% in

2021

Due to COVID-19, the continent’s economies contracted by -3.3% in

2020

GDP of USD 1.8 trillion (2019)

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Africa: Impact of COVID-19

Nigeria

Kenya

South Africa

Over 1.2 million cases reported.

More than 40 million Africans could be thrust into extreme poverty as a

result of COVID-19.

Per capita income across Sub-Saharan Africa

reduced by an estimated -6.5%.

Over 37,000 deaths.

Ethiopia

40Sources: World Economic Outlook, International Monetary Fund (Oct. 2020); African Economic Outlook 2020, Supplement: Amid COVID-19, African Development Bank Group (June 22, 2020); Africa’s Pulse, Charting the Road to Recovery, World Bank Group (Oct. 22, 2020).

Proj. 2020 GDP

Actual 2020 GDP

Proj. 2021 GDP

2 % -4.3% 1.7%

1.1% -7.8% to

-11.5%

3.0%

7.2% 1.9% -0.023%

6% 1 4.67%

2020 GDP:

• GDP: USD 95.5 billion



• GDP: USD 448 billion

Africa: Corruption Climate

COVID-19 has exacerbated corruption concerns

Sources: Africa’s Lawyers offer a View into the Dept and Scale of Corruption On the Continent, Law.com, August 04, 2020; Transparency, Accountability and Anti-Corruption in COVID-19 Crisis Response and Recovery, UNDP, July 11, 2020; Citizens Struggle as Promised COVID-19 Aid Goes Missing, Transparency International, September 16, 2020.

The African Development Bank estimates that corruption costs USD 148 billion per year.

Efforts to confront the pandemic’s onset have led to an erosion of the controls and oversight necessary to mitigate corruption.

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Without effective oversight, corruption resulted in:

• Price gouging of medical equipment and supplies.

• Procurement-related corruption/fraud in purchasing medical equipment.

• Undue preferential treatment based on relationships to individuals in power.

• Petty corruption in the receipt of healthcare.

Reports in Nigeria, Rwanda, Zimbabwe and other nations indicate that hundreds of millions of dollars in COVID-19 foreign aid have gone unaccounted for.

Africa: Regional Cooperation in Anti-Corruption Efforts

Sources: Statement of the Chairperson of the African Union Commission on the Commemoration of The African Anti-Corruption Day, July 11, 2020, African Union; Statement of the Chairperson of the African Union Advisory Board on Corruption, July 11, 2020, African Union; Joint Statement of the African Commission on Human and Peoples’ Rights and the African Union Advisory Board on Corruptions, November 2, 2020, African Union.

Regional actors like the African Union and its Advisory Board on Corruption are maintaining cooperative initiatives like the African Anti-Corruption Day.

• In a July 11, 2020 virtual meeting, the African Union Commission and the African Union Advisory Board on Corruption (“AUABC”) issued statements commemorating the 4th Edition of the African Anti-Corruption Day. The statements also highlighted the AUABC’s role in pursuit of effective anti-corruption measures and the ratification by Equatorial Guinea and Tunisia of the African Union Convention on Preventing and Combatting Corruption.

• On November 2, 2020, the AUABC and the African Commission on Human and Peoples’ Rights issued a joint statement on the effects of COVID-19 on anti-corruption efforts in Africa. The statement expressed concern and alarm over reports of misuse of emergency relief funds and Personal Protective Equipment, price gouging and the creation of artificial shortages of essential goods. The statement called on states to implement stringent anti-corruption measures, including transparent and accountable processes.

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Africa: Increasing Local Enforcement

Sources: Angola Sentences Ex-President’s Son to Five-year Jail for Fraud, Al Jazeera, Aug. 14, 2020; DRC President’s Top Aide Gets 20-year Jail Term for Corruption, Al Jazeera, June 20, 2020. 43

Angola: The Angolan Supreme Court sentenced Jose Filomeno dos Santos to a five-year jail sentence for fraud while he headed the state’s sovereign wealth fund from 2013 to 2018. Dos Santos is the son of former president Jose Eduardo dos Santos—in power from 1979 to 2017. Besides dos Santos, three other co-defendants were sentenced to prison terms for fraud and embezzlement, including the former governor of the National Bank of Angola Valter Filipe da Silva. Dos Santos is accused of transferring USD 500 million to a Swiss bank account.

Several leaders of Africa’s largest economies, including Nigeria’s Muhammadu Buhari (elected May 2015), South Africa’s Cyril Ramaphosa (February 2018), Algeria’s Abdelmadjid Tebboune (elected December 2019), Angola’s João Lourenço (September 2017), and Ethiopia’s Abiy Ahmed (April 2018), have identified rooting out corruption as priorities.

Democratic Republic of Congo: The DRC’s highest court sentenced Vital Kamerhe and a co-defendant—a Lebanese businessman named Jammal Samih—to 20 years in jail for embezzling over USD 48 million. Kamerhe is President Felix Tshisekedi’s former chief of staff, and is the most senior DRC politician to face corruption charges in the central African state.

Africa: Increasing Local Enforcement (cont’d)

44Sources: Kenya: Will Nairobi Governor Sonko find a way out of his impeachment?, The Africa Report, 4 Dec. 2020; Medical mystery, Development and Cooperation, Dec. 13, 2020; African Soccer Chief Is Barred for Five Years Over Ethics Violations, N.Y. Times, Nov. 23, 2020; PCCB Nods in CAF-TFF Saga, Daily News, Dec. 17, 2020; Maldives ex-VP Ahmed Adeeb Sentenced to 20 Years for Corruption, Al Jazeera, Oct. 5, 2020.

Kenya: In the wake of the COVID-19 pandemic, the Ethics and Anti-Corruption Commission opened an investigation into the disappearance of medical supplies and equipment received from organizations such as the World Bank, the International Monetary Fund, and the World Health Organization. The investigation unearthed what is now called the “Covid-19 millionaires scandal,” in which they discovered that price-gougers were selling medical supplies to the Kenya Medical Supplies Authority at three times the market rate.

In December 2020, the Ethics and Anti-Corruption Commission arrested Robert Pavel Oimeke, the head of Kenya’s energy sector regulator, over bribery allegations, and Kenya’s capital assembly impeached Mike Sonko, the governor of Nairobi, for charges including abuse of office, gross misconduct, breaking the law, and failing to approve a budget.

Maldives: Former Vice President Ahmed Adeeb was sentenced to 20 years in prison and received a USD 129,892 fine in relation to corruption charges, including embezzlement, money laundering, and misuse of government authority. Adeeb was involved in a scheme in which property was sold at well below market value, costing the government USD 259 million.


South Africa: In December 2020, a special investigating unit arrested Ace Magashule - Secretary General of the ANC - for crimes including fraud and money laundering. The arrest makes Magashule the highest-profile serving politician to face charges since Ramaphosa took office.

Separately, reports of irregularities in government contracts related to the provision of COVID-19 medical equipment and services prompted South African President Cyril Ramaphosa to convene a ministerial committee to review the allegations. The contracts have included PPE purchases at inflated prices, and the award of contracts to individuals connected to the government or the ruling African National Congress party.

Sources:Eni Gets Green Light In Nigeria Offshore Oil Block Doc Bid, Law360, 15 Oct. 2020; Nigeria asks for $1.1 billion advance from Eni, Shell in graft case, Reuters, Sept. 9, 2020.; Africa’s Biggest Bank Says Ramaphosa Winning Graft Battle, Bloomberg, Nov. 19, 2020; S. African Ruling Party Recommends Ramaphosa Rival Step Down, Bloomberg, Dec. 15, 2020. South Africa Sets Up Body to Probe Coronavirus Corruption, Al Jazeera, Aug. 7, 2020; Senior South African ANC Official Granted Bail in Corruption Case, Al Jazeera, Nov. 13, 2020;

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Nigeria: The Nigerian Economic and Financial Crimes Commission (“EFCC”) has continued its investigations into the “Malabu Oil Scandal,” involving Shell and ENI’s purchase of an oilfield through an alleged USD 1.3 billion corrupt deal made in 2011. In September 2020, the Federal Government of Nigeria asked a court in Milan to order Shell and ENI to pay an advance payment of around USD 1 billion for damages resulting from the fallout of the Malabu Oil Scandal.


Sources: Tanzania launches corruption probe into its cement industry, Global Construction Review, Nov. 23, 2020; Tanzania government launch investigations despite TFF defending Karia on Caf saga, Goal, Nov. 27, 2020. Zimbabwe VP named Health Minister After Coronavirus Graft Scandal, Al Jazeera, Aug. 5, 2020

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Tanzania: In November 2020, the Prevention and Combating of Corruption Bureau (“PCCB”) and Director of Criminal Investigations launched an investigation into the production and distribution chain of its cement industry for potential market manipulation. Also in November 2020, the PCCB confirmed they are investigating the president of the Tanzania Football Federation, Wallace Karia, for allegedly receiving illicit funds from Ahmad Ahmad, the president of the Confederation of African Football. Ahmad was barred from the sport by FIFA on November 23, 2020.

Zimbabwe: Zimbabwean Vice President Constantino Chiwenga was appointed Minister of Health in charge of overseeing the country’s COVID-19 response. The previous official—Obadiah Moyo—was accused of illegally awarding government contracts and negotiating a deal with a U.A.E. company to supply PPE at significantly inflated prices. Moyo was arrested in June 2020 and released on bail.

Africa: U.S. Enforcement Actions

Mozambique: Manuel Chang, the ex-Finance Minister of Mozambique, continues to be subject to competing extradition requests from the United States (for violations of the FCPA) and Mozambique for his conduct related to a USD 2 billion dollar debt scandal that came to light back in 2016. Three former Credit Suisse bankers involved with the loan pleaded guilty in 2020 to bribery and fraud. Chang has been held in South Africa for the last two years, and awaits the decision of the South African High Court.

Ghana: In April, the SEC charged Asante Berko, a former executive of Goldman Sachs U.K., under the FCPA for his efforts to secure over USD 2.5 million in bribes to government officials in Ghana on behalf of an unidentified Turkish energy company. The indictment alleges specifically that Berko personally paid more than USD 60,000 in bribes to officials and facilitated other bribes of over USD 200,000. The indictment specifically indicates that Goldman Sachs had not committed any wrongdoing, indicating that it took appropriate measures to prevent Berko’s behavior and that Berko himself misled the company’s compliance team regarding his illicit activities.

Sources: Mozambique files charges against ex-fin min over $2 billion debt, Reuters, 9 Nov. 2020; SEC charges former Goldman Sachs exec with ‘egregious’ FCPA violations, FCPA Blog, April 14, 2020. 47

Senegal: In June 2019, the BBC broadcast a documentary titled “Panorama: The USD 10 Billion Energy Scandal.” The documentary covered the sale and acquisition of twooffshore oil and gas blocks in Senegal, alleging that the manner in which the rights to the blocks were sold off was suspicious. Kosmos Energy Ltd. held an interest in some of the assets covered on the show. Kosmos subsequently disclosed that the SEC had requested certain documents related to these assets at issue.

Africa: European Enforcement Actions

Libya: In June 2018, Société Générale S.A.’s subsidiary pleaded guilty to paying bribes of over USD 90 million to Libyan officials. In exchange for the bribes, the bank received over USD 3.6 billion in investments from Libyan state-owned institutions and earned over USD 500 million. The Company agreed to pay USD 292.8 million to resolve the matter.

In May 2020, the Libyan Investment Authority (“LIA”), a sovereign wealth fund, sued Credit Suisse in the High Court of England and Wales, claiming that Credit Suisse invested in a scheme involving payments to a man who bribed and intimidated LIA employees to enter into the investment deal with Credit Suisse. Credit Suisse argued in August that LIA should not be allowed to sue over claims that have already been resolved by Société Générale’s 2017 settlement.

Sources: Credit Suisse Accuses Libya Of Rehashing Bribery Claims, Law360, 6 Aug. 2020; SocGen Pays €963M To Settle Libya Fund Bribery Claims, Law360, 7 May 2017; Credit Suisse Accused Of Hiding Payments In Bribery Suit, Law360, 15 May 2020.

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Africa: Enforcement Trends 2020 and Key Lessons

• Despite the fact that Sub-Saharan Africa has been less severely affected by COVID-19 than the U.S. and Europe, the pandemic is and will have a significant impact on enforcement trends.

• Local, U.S. and European enforcement actions show that corruption remains a significant investment risk for foreign companies. These actions include cases against individuals who allegedly bribed government officials (Asante Berko, Goldman Sachs) and charges against the government officials themselves (Manuel Chang, the ex-Finance Minister of Mozambique).

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• While investigation trends show a continued commitment to anti-corruption efforts, these also highlight the high risks posed by African financial, infrastructure, energy, or healthcare industries. Foreign investors operating in these sectors should consider taking precautions as a result.

LATIN AMERICA

50

Latin America and the Caribbean: Market Characteristics

Sources: Latin America and the Caribbean Population, Worldometer (Dec. 18, 2020); U.N. Economic Commission for Latin America and the Caribbean, Preliminary Overview of the Economies (Dec. 2020); 2019 Corruption Perceptions Index, Transparency International

Estimated population is 656.7 million, or

8.4% of the World’s population.

The median age is 31 years.

Avg. GDP drop of -7.7% for 2020 –the largest drop in 120 years – and

rebound of 3.7% GDP in 2021.

Brazil

• Population: 213.2 million.

• GDP: USD 1.84 trillion.

• Brazil ranks 106th out of 180 countries on the Corruption Perceptions Index.

Argentina


• GDP: USD 445.5 billion.

• Argentina ranks 66th out of 180 countries on the Corruption Perceptions Index.

Mexico


• GDP: USD 1.27trillion.

• Mexico ranks 130th out of 180 countries on the Corruption Perceptions Index.

Colombia


• GDP: USD 323.1 billion.

• Colombia ranks 96th out of 180 countries on the Corruption Perceptions Index.

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Latin America: Significant Corruption News

Brazil• Despite significant pressure to shut it down, the Brazilian Prosecutor General extended the Lava Jato anti-corruption task force’s mandate to

at least January 31, 2021. Ending the mandate could have stopped and annulled ongoing investigations and trials, which are currently handled by fourteen prosecutors.

• At the request of the Brazilian Attorney General, Brazil’s Supreme Court approved an investigation into accusations that President Bolsonaro sought to interfere with police investigations for political gain. The Brazilian Justice Minister, Sérgio Moro, resigned in protest after accusing the president of improper conduct in the appointment of the Brazilian Federal Police Chief.

• In August 2020, Brazil’s Comptroller-General’s Office, Attorney General’s Office, Ministry of Justice and Public Security, and Federal Court of Accounts announced a “technical cooperation agreement” that aims to promote more effective cooperation among Brazil’s public agencies executing leniency agreements, which have been a significant tool in recent corruption investigations.

• In December 2019, the Brazilian Congress passed the so-called “Anti-crime Package,” a legislative reform that entered into force in late January 2020. The legislation reformed more than a dozen laws, including the Penal Code, the Criminal Punishment Law, and the Anti-Money Laundering Law. The reform included the creation of NPAs in criminal and civil contexts, and special protections, reporting mechanisms, and financial incentives for whistleblowers.

Mexico• In July 2020, Spanish authorities extradited former PEMEX CEO, Emilio Lozoya, to Mexico to face corruption charges. He is accused of

taking around USD 10 million in bribes for PEMEX projects.

• In October 2020, without notice to Mexican officials, U.S. authorities arrested Gen. Salvador Cienfuegos, former Minister of Defense, on charges of drug trafficking. He had, among other things, allegedly provided material support to drug cartels in Mexico. The U.S. later dropped the charges, citing the need to maintain a cooperative posture with Mexican authorities. Months earlier, in an unrelated case, the U.S. had arrested the former Mexican Secretary of Public Security on allegations of drug trafficking “in exchange for multimillion-dollar bribes.”

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Latin America: Significant Corruption News (cont’d)

Argentina• Though slowed by the death of a central judge in the matter, legal proceedings have continued in connection with

the “Notebooks” scandal related to former President, and current VP, Cristina Kirchner’s administration. In them, prosecutors have tried to admit evidence of notebook logs for a former government driver showing cash drop-offs at government officials’ homes. In November 2020, a federal judge acquitted Kirchner in one of the eleven corruption trials after determining the notebooks were not admissible evidence; appeals are ongoing.

• In October 2020, the Swiss Attorney General announced the seizure of USD 40 million from Nicolás Leoz and Eduardo Deluca, the Argentine former president and secretary general, respectively, of the South American Football Confederation (“CONMEBOL”) on allegations of corruption.

Colombia• In October 2020, Colombia’s highest administrative court upheld a Bogotá Chamber of Commerce award nullifying an

Odebrecht consortium’s contract for a billion-dollar highway construction because of corruption.• In October 2020, a Colombian judge ordered the release of former President Alvaro Uribe from house arrest, following

Uribe's resignation as a Senator. He is under investigation for a potential scheme to bribe imprisoned paramilitary witnesses to give favorable testimony in investigations into Uribe’s support for paramilitaries that abused human rights while fighting FARC.

Ecuador• In September 2020, Ecuador’s National Court of Justice ratified former President Rafael Correa’s eight-year prison

sentence for breaking campaign finance laws. The sentence also imposed USD 14.7 million of comprehensive reparations to the state and stripped Correa’s citizenship rights.

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Latin America-Focused Enforcement Actions by U.S. Authorities

The oil and gas, and construction sectors continue to lead the way in enforcement actions:• In September 2020, Sargeant Marine, Inc., a U.S.-based asphalt

products company, pled guilty to paying millions of dollars in bribes to foreign officials in Brazil, Venezuela, and Ecuador to obtain asphalt contracts with the countries’ state-owned or -controlled oil companies.

• DOJ charged Luis Enrique and Ricardo Alberto Martinelli, sons of former Panamanian President Ricardo Martinelli, for allegedly serving as intermediaries for approximately USD 28 million in bribe payments from Odebrecht.

• In December 2020, Vitol, Inc., a major energy trading firm, admitted that it and its co-conspirators paid bribes of more than USD 8 million to officials at Petrobras in exchange for receiving confidential pricing and competitor information that Vitol used to win fuel oil contracts with Petrobras. It also admitted to a second conspiracy to bribe officials in Ecuador and Mexico in order to obtain and retain business in connection with the purchase and sale of oil products.

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Latin America-Focused Enforcement Actions by U.S. Authorities (cont’d.)

• J&F Investimentos S.A. (J&F), a Brazil-based investment company focusing on the meat and agriculture industry, agreed to pay a criminal penalty of US$256 million to settle FCPA allegations. DOJ's allegations included that J&F paid more than US$148 million in bribes to high-level officials at a Brazilian state-owned and -controlled bank, more than US$4.6 million in bribes to a Brazilian state-controlled pension fund official, and approximately US$25 million to a high-ranking official in the Brazilian legislative branch, all in exchange for lucrative business opportunities.

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• Alfonzo Gravina Munoz, a former procurement officer of Venezuela’s state-owned and state-controlled energy company, PDVSA, was sentenced to 70 months in prison followed by three years of supervised release for, among other things, laundering the proceeds of a corrupt scheme to secure contracts from PDVSA through bribery, and obstructing the government’s investigation into bribes paid to Venezuelan government officials in exchange for securing additional business with Citgo, a Houston-based PDVSA subsidiary.

• Jose Luis De Jongh Atencio, a dual U.S.-Venezuelan citizen, and a former procurement officer and manager in Citgo’s Special Projects Group, was charged for his alleged role in laundering the proceeds of a scheme involving US$2.5 million in bribes he received in exchange for facilitating business with Citgo and PDVSA.

Increased Politicization of Anti-Corruption Efforts Has Limited Effectiveness of Recent Initiatives

• In several countries, allegations of political interference have raised concerns about the future of anti-corruption initiatives:

In Brazil, Minister of Justice Moro resigned in protest over President Bolsonaro’s replacement of the Brazilian Federal Police Chief.

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- The Economist

In Guatemala, President Morales shut down the United Nations-backed International Commission Against Impunity in Guatemala. Then, on October 7, 2020, Guatemala’s Attorney General approved nine administrative complaints against the remaining anti-corruption organization, the Special Prosecutor’s Office Against Impunity.

In Honduras, President Hernández similarly declined to renew an Organization of American States-backed anti-corruption watchdog.

In Mexico, Pres. López Obrador and the Mexican Congress have failed to implement and fund key provisions of the widely heralded new National Anti-Corruption System.

In Argentina, the failure to fund and staff the Anti-Corruption Office has led to that Office withdrawing a significant number of complaints in courts.

Political Instability Further Hampers Anti-Corruption Efforts

• Comprehensive studies suggest that most of the major economies in the region, including Brazil, Mexico, Chile, Argentina, Guatemala, Colombia, and Venezuela, have lost ground recently in the battle against corruption. In Peru, President Martín Vizcarra was removed from office by Congress, citing bribery

allegations. His successor then resigned less than a week after entering office, in response to six days of protests against Vizcarra’s impeachment, viewed by many as a power-grab meant to thwart Vizcarra’s anti-corruption efforts. This move ushered in another president—the fifth such president in the last five years and the third in the span of a week.

In Ecuador, a former President and two former Vice Presidents have been arrested and charged with corruption and related offenses.

In Panama, President Cortizo was elected on a platform largely based on “ending a decade lost to corruption.” Yet, he has been unable to muster the political support within Congress to pass meaningful anti-corruption reforms.

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Americas Society/Council of the Americas, Capacity to Combat Corruption Index

Targeted Initiatives Generate Cautious Optimism

• Notwithstanding the region-wide stalling of anti-corruption progress, there are some targeted initiatives underway which could, if implemented and funded adequately, help turn the tide:

In Peru, the new National Board of Justice, created in response to corruption scandals plaguing the judiciary, is designed to be an independent body that will designate and oversee all judges and prosecutors in the country.

In Chile, voters overwhelmingly supported – 78% to 22% –the drafting of a new constitution, which is expected to implement new anti-corruption measures.

In El Salvador, President Bukele, elected in February 2019, followed through on a campaign pledge by establishing the International Commission to Combat Corruption (CICIES).

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- World Politics Review

Latin America: Key Trends

Corruption continues to be top of mind for most Latin Americans:• Per Transparency International’s Global Corruption Barometer, an overwhelming majority of people in

the region (85%) think that government corruption is a significant problem.• More than half of Latin Americans believe that their government was not successful in fighting

corruption in the past year.

Recent scandals have led to political change and legislative reform, but the drive for change has largely stalled• Scandals such as Brazil’s Lava Jato (Car Wash), Guatemala’s La Línea (The Line), Costa Rica’s El

Cementazo (The Great Cement), and Argentina’s Los Cuadernos (Notebooks) have generated public outrage, and in some cases, have ushered in new governments altogether. But that wave of public outrage has not always translated into concrete, effective measures to curb corruption.

• Operation Car Wash is one of the few anti-corruption success stories, leading to numerous prosecutions in Brazil.

• In several countries, including Guatemala, Haiti, Honduras, Argentina, and Mexico, current or recent administrations are mired by allegations that close ties or family members of powerful politicians have engaged in corrupt or illegal conduct, which has in turn resulted in the shutdown of investigative or prosecutorial organs.

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Latin America: Key TrendsPandemic’s Economic Impact• Latin America is experiencing the largest GDP drop in more than 120 years. Governments are strapped

for cash, and in dire need of public health funding, including for COVID-19 vaccines. It is unlikely that anti-corruption initiatives will draw significant attention or funding in the coming year.

COVID-19 related Procurement Mired in Corruption• Colombia’s inspector general opened hundreds of corruption cases against political donors who

received lucrative contracts from the State with respect to the COVID-19 response.• Mexican and Ecuadorian authorities have launched criminal probes into significant overpayment for

ventilators and other emergency supplies in contracts with politically connected persons.• A Brazilian senator is under investigation for theft of COVID-19 relief funds; the funds were recovered

in the senator’s undergarments at the time of the police raid.

U.S. authorities continue to demonstrate interest in the region, through enforcement actions and cooperation with local prosecutors• DOJ and SEC maintain a steady docket of Latin America-focused matters, with a particular emphasis

on PDVSA/Venezuela, and Odebrecht-related investigations.• On August 14, 2020, Panama and the U.S. announced a partnership to create a new Anti-Money

Laundering/Anti-Corruption Task Force, which reportedly involves the training of Panamanian prosecutors and investigators by the FBI. The U.S. has committed USD 5M to the task force over the next five years.

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RUSSIA

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Russia: Market Characteristics

Estimated population of Russia in 2020. Median age 40 years. 146 million

GDP growth in 2020. -4%

Annual inflation for 2020.4%

Overall rank in the World Bank’s Doing Business Report 2020.

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FDI inflows into Russia in Q1-Q3 2020. (Drop of approx. 87% compared to the same period of 2019).

USD 3.2 billion

FDI outflows out of Russia in Q1-Q3 2020. (Drop of approx. 94% compared to the same period of 2019).

USD 0.9 billion

62• Sources: https://rosstat.gov.ru; World Bank Russia Economic Report p. 42; https://data.oecd.org/price/inflation-

forecast.htm#indicator-chart; https://www.doingbusiness.org/en/data/exploreeconomies/Russia; http://www.cbr.ru/Collection/Collection/File/31761/Bbs2011_e.pdf ; https://www.ceicdata.com/en/indicator/russia/direct-investment-abroad; https://www.ceicdata.com/en/indicator/russia/foreign-direct-investment.

Sources: https://meduza.io/en/news/2020/12/08/sibur-confirms-that-putin-s-former-son-in-law-paid-100-for-company-shares-worth-millionshttps://www.occrp.org/en/investigations/love-offshores-and-administrative-resources-how-marrying-putins-daughter-gave-kirill-shamalov-a-world-of-opportunityhttps://www.themoscowtimes.com/2020/12/07/putins-ex-son-in-law-bought-380m-stake-in-petrochemicals-giant-for-100-investigation-a72260 https://www.kommersant.ru/doc/2781714

Russia: Overview of Legislative Developments and Related Headlines

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Amendments to the ConstitutionConfirmed by national vote, the amendments, inter alia, allowed for the resetting of term limitsfor the current President of Russia. Assuming re-election, President Putin could stay President foranother two terms ending in the year of 2036.Amendments to the law “On guarantees to the President of the Russian Federation whoconcluded execution of his authorities and members of his family” of Dec 22, 2020 N 462-FZThe President of Russia is granted immunity from any enforcement action or prosecution. Theimmunity is no longer limited to the prosecution of crimes committed while in office, but is nowalmost absolute.

Image: www.er.ru

Kirill Shamalov Photo: Times

Headline Story – Sibur share acquisition by a person with close ties to Putin‘s family Responding to news surfaced from investigative reports in December 2020, Russian

petrochemical company Sibur’s Chairman confirmed that Kirill Shamalov received in 2013 a3.8% stake of Sibur (estimated by Shamalov to be worth USD 380 million) for USD 100,however, according to Sibur, the deal came with several conditions and the USD 100 price tagshould not be considered a reflection of the value of the consideration provided for it.

The USD 100 share acquisition was apparently made just months after Shamalov marriedKaterina Tikhonova who is widely believed to the President Putin’s daughter.

Russia: Overview of Legislative and other Relevant Developments

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New Russian Supreme Court Guidance on Administrative Fines under Art. 19.28 KoAPIn its survey on court practices of July 8, 2020, the Presidium of the Russian Supreme Court provided clarifying guidanceas to when administrative fines in connection with bribery may be levied against legal entities. In particular:

The payment made by the bribe giver has to also be inthe interest of the respective legal entity;

That the purpose of the payment as a bribe must beexplicit and unambiguous;

Things of value (other than money) can constitutebribes;

When bribes are being made in stages orsystematically, the respective amounts will becompounded to assess the relevant gravity level;

The offering of a bribe without mentioning aspecific amount will lead to an administrative fine atthe lowest sanctionable level;

To levy a fine against the legal entity, the fulfilment ofall objective characteristics of the crime by theindividual suffice; a conviction of the individual isnot a mandatory requirement;

If property of the legal entity is arrested to secure theenvisaged fines, such arrest order should be specificand not exceed the amount of the envisaged fines;

The minimum fine is set at RRub 1 million. Even in“extraordinary circumstance“ (e.g. threat ofinsolvency) this amount cannot be reduced to less thanRRub 500,000;

A confiscation of the bribe amount in addition to thefine is mandatory and not subject to the discretion ofthe deciding court; and

- importantly –

Legal entities may avoid fines when they disclosethe crime and/or assist in the enforcement activitiesto prosecute the crime.

Navalny’s frontal attacks against leading members of PresidentPutin’s Government and inner-circle, which have exposedexamples of drastic graft and raised allegations of briberythrough a dedicated YouTube channel, have become the catalystfor a grass-root movement that demands fundamental politicalchanges in Russia.

According to the EU, the poisoning of Navalny with theNovichok nerve agent became possible "only with the consent ofthe Presidential Executive Office" and with the participation ofthe FSB. The act led to sanctions against several Russian stateofficials.

Russia: The Political and Personal Fight Centered around Corruption

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Igor KrasnovImage: www.rg.ru

Alexey Navalny Image: Evgeny Feldman

The new Russian Prosecutor General Igor Krasnov (appointed inJanuary 2020), was leading a team of 112 prosecutors toinvestigate Navalny’s FBK for alleged money laundering.

FBK’s investigations, however, which raised obvious questionsregarding the sources of wealth of Russia’s top state officials, didnot prompt the Russian government to commence officialenquiries.

On December 25, 2020, law № 1070431-7 rendered informationabout property of judges, law enforcement and controllingagency officials confidential.

In Russia, the fight against corruption has become thecentral political battleground between President Putin‘sGovernment and the opposition groups centered around Mr.Alexey Navalny and his Fund to Fight Corruption (FBK).

Sources: https://www.consilium.europa.eu/en/press/press-releases/2020/10/15/use-of-chemical-weapons-in-the-assassination-attempt-on-alexei-navalny-eu-sanctions-six-individuals-and-one-entity/https://sozd.duma.gov.ru/bill/1070431-7

2021 - 2021

2021 - 2021

Russia: Attempts to Silence Those Speaking Out Against Corruption Lead to New International Sanctions

New UK sanctions (introduced in July 2020) following alleged human rights violations, and EU sanctions within the framework of restrictivemeasures against the proliferation and use of chemical weapons (following the Navalny poisoning in October 2020) have been appliedagainst Russian officials and are setting a new tone for future targeted personal sanctions.

On December 7, 2020 the European Council adopted a global human rights sanction regime that will allow it to target individuals, entitiesand bodies responsible for, involved in or associated with serious human rights violations and abuses worldwide.

2021Jul Sep Nov Jan Mar May Jul

Broadening of Nord Stream 2 and Turkstream sanctions though National Defense Authorization Act FY21

US Department of State updates CAATSA Guidance to include Nord Stream 2 and TurkStream

July 2020

US Department of State Guidance broadens scope on Nord Stream 2 and TurkStream

October 2020

EU Travel bans and asset freezes over Navalny‘s poisoningOctober 2020

Russia's retaliatory travel bans over Navalny sanctions

December 2020

UK Travel bans and asset freezes for 25 Russian nationals linked to Magnitsky’s prosecution July 2020

EU Human Rights Sanctions RegimeDecember 2020

Russia's retaliatory travel bans for UK officials over Magnitsky sanctions

November 2020

Russian Draft Law on asset freezesOctober 2020

Sources:https://www.gov.uk/government/news/uk-announces-first-sanctions-under-new-global-human-rights-regime; https://www.consilium.europa.eu/en/press/press-releases/2020/10/15/use-of-chemical-weapons-in-the-assassination-attempt-on-alexei-navalny-eu-sanctions-six-individuals-and-one-entity/; https://www.consilium.europa.eu/en/press/press-releases/2020/12/07/eu-adopts-a-global-human-rights-sanctions-regime/; https://www.mid.ru/ru/foreign_policy/news/-/asset_publisher/cKNonkJE02Bw/content/id/4510703; https://www.mid.ru/ru/foreign_policy/news/-/asset_publisher/cKNonkJE02Bw/content/id/4515981.

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“The State provides huge funds which are spent under rushed conditions with difficulties in controlling.“Kiril Kabanov, Head of the National Anti-Corruption Committee

Transparency International warned at the onset of the Pandemic that “procurement in health systems is one of the activities most hard-hit by corruption” and that “open and transparent contracting processes would allow red flags of corruption to be more easily spotted.”

Russia: Risk Radar for Corruption Risks During and Following the COVID-19 Pandemic

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Pandemic as driving force for cloud technologies, e-commerce and digitalization presents increased risks“IT and Digitalization sphere has highest corruption risks.” –

Head of the National Anti-Corruption Committee KirilKabanov. This is due to:

Lack of transparency. Constant large-scale state budget infusions.

Healthcare industry corruption risks Russian Ministry of Finance issued a letter allowing state

procurement for the purposes of pandemic response froma sole supplier without competitive bidding procedures.

By Q3 2020 public procurement of drugs reached USD 6.2billion, thereafter the share of sole supplier procurementcontracts reached 30%.

Conflict of interest and affiliation remains one of the mostcommon violations in public procurement.

Image: OECD Image: pexels.com

Sources: http://ti-health.org/content/coronavirus-covid19-corruption-health-systems/#_edn12;https://www.kommersant.ru/doc/4573975?from=four_business; https://www.garant.ru/products/ipo/prime/doc/73669895/;https://iz.ru/1104213/elena-sidorenko/prikrylis-koronoi-chislo-narushenii-s-goszakupkami-vyroslo-pochti-na-6.

Russia: Lessons Learned from Recent Enforcement Action Involving Russia

Lessons Learned The nationalized healthcare system and highly regulated Russia healthcare

market pose formidable corruption risks. Payments to healthcare professionals and third parties require continuous

monitoring and scrutiny. Suspicious payments can often be identified only by conducting on-site

audits of local accounts held by subsidiaries. Regulators continue to levy fines where compliance programs are

inadequate.

Russian Counter-SanctionsImport Substitution

SEC Charges Alexion Pharmaceuticals with FCPA Violations Based on Conduct in Russia and TurkeyAlexion Pharmaceuticals Inc. pays USD 21.4 million to resolve alleged FCPA books and recordsand internal controls provisions violations.

Payments to third-party consultants, honoraria and grants to “influence the allocation ofregional healthcare budgets, increase the number of approved prescriptions”, and “favorablyinfluence the regulatory treatment” of Alexion medicament Soliris, together with “inadequateinternal accounting controls and lack of an effective anticorruption compliance program.”(SEC Order 3-19852, July 2, 2020)

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Image: Bloomberg

Sources: https://www.sec.gov/litigation/admin/2020/34-89214.pdf.

Initial risk assessment and on-boarding of

client

• Individual risk (PEP, SDN, other)•Other risks (Country, industry, other)

•Counterparty Due Diligence

Initial risk assessment and

approval of transaction

•Type of transaction•End-customer•Dedicated checklists provided to all employees

Continuous monitoring of developments

impacting initial risk assessment

•Changes in the transaction•Legal changes•Other findings (e.g. audit findings)•Monitoring of sanctions lists•Financial transactions monitoring•Procurement monitoring

Russia: Comprehensive Risk Mitigation Strategies to Counter FCPA, OFAC and AML Risks in One Go

Customer On-Boarding and Life-Cycle-Management

An end-to-end assessment and monitoring of risks throughout the full life cycle of a client relationship is the key to an effective compliance management response to FCPA, OFAC, and AML challenges in multiple jurisdictions.

FCPA, OFAC and AML guidance overlap in many fields and call for an unified approach to tackle similar challenges: Foster “culture of compliance” Apply rigorous KYC procedures when

onboarding a new business partner Delegate autonomy to compliance unit Ensure that compliance unit receives

adequate resources Conduct continuous monitoring and audit

activities using a risk-based approach Avoid siloed approach in compliance

programs addressing FCPA, OFAC and AML Risks

69Sources: https://www.treasury.gov/resource-center/sanctions/Documents/framework_ofac_cc.pdfhttps://www.justice.gov/criminal-fraud/file/1306671/downloadhttps://www.federalregister.gov/documents/2020/09/17/2020-20527/anti-money-laundering-program-effectiveness#citation-24-p58028

Russia: Key Takeaways

• Russia has evolved from a challenging jurisdiction with significant FCPA exposure to one of the keyantagonists challenging the fundamentals underlying the OECD Convention Combating Bribery.• On an operative level, Russia has implemented recommendations of the OECD Convention and

continues enforcing these provisions in selected instances that do not pose a threat to the ruling politicalelite.

• Simultaneously, the Russian Government has fostered an erosion of checks and balances that wouldotherwise ensure corrupt acts are brought to the attention of the public and state authorities.

• The Russian Government and Parliament have created a set of rules that are designed to protect or carveout members of the political elite from public scrutiny and prosecution.

• Fear, at the highest political level, of being held accountable to the government’s own anti-briberystandards has resulted in the recent legislation creating life long immunity for the President of Russia.

• The broad use of sanctions - applied by the U.S., the EU and the UK, with counter-sanctions imposed byRussia - creates an additional layer of complexity in conducting business in Russia as well as increasedcorruption risks resulting from the lack of transparency in structures set up and operated to avoid or bypasssanctions.

• Recent U.S. sanctions targeted at Nord Stream 2 impact Russian and EU-companies alike, and threaten tocreate a divide between the EU and the U.S. that will make the enforcement of the sanctions less effective.

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GLOBAL TRENDS AND RISK MITIGATION STRATEGIES

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Trend: COVID-19 Threatens to Undermine Global Anti-Corruption Efforts

The COVID-19 pandemic has created additional areas for corruption to thrive

• Government increasingly asking private companies to make monetary or in-kind donations to support COVID-19 relief efforts.

• Slowing economy incentivizing sales employees to cut compliance corners in an effort to hit targets in shrinking markets.

• Loss of, or reduction in, visibility on key compliance issues due to travel restrictions (e.g., no on-site audits, monitoring, or testing).

• Lack of in-person interviews and other investigative activities may reduce effectiveness and integrity of internal reviews.

• Reduced revenue leading to cuts in compliance budgets.

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• Widespread graft reported in the areas of PPE procurement, healthcare, and distribution of aid intended for victims of the pandemic. Expedited procurement processes create more discretion for officials.

• Government agencies reporting difficulties in investigating corrupt conduct due to logistical concerns.

• Lockdown restrictions result in more government contacts (and potentially more bribe requests) as law enforcement conduct visits or require meetings and permits to ensure that business are operating in accordance with the ordinances.

“[T]he COVID-19 crisis creates additional opportunities for corruption. Governments are spending rapidly to get economies back on track, provide emergency support and procure medical supplies. Oversight may be weaker.”

-UN Secretary General António Guterres

Source: United Nations, Secretary-General’s message on International Anti-Corruption Day (December 9, 2020) https://www.un.org/sg/en/content/sg/statement/2020-12-09/secretary-generals-message-international-anti-corruption-day-scroll-down-for-french-version.

Mitigation: COVID-19 Compliance Lapses

Practical Tips to Maintaining Your Commitment to Ethical Business Conduct During the Pandemic

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• Assess how the pandemic has affected your operations. Do you compete for government contracts related to COVID-19 relief? Has your company implemented more streamlined procurement processes that may weaken compliance controls?

• Ensure compliance resources remain accessible. Understand where those with compliance responsibilities are working and what communication limitations they may have. Compliance policies, reporting lines, and messaging should be available online while employees are not in the office.

• Re-assess sales targets to ensure they are in line with market realities. Silver Lining?

It’s not all bad. Take advantage of WFH arrangements to advance compliance initiatives:

-Virtual assessments and investigations can cover more geographic ground when not constrained by travel.

-Focus on completing any planned online trainings.

-Reduced in-person interaction with government officials, gifts and entertainment, and business meals allow compliance professionals to focus resources elsewhere.

• Ensure that your company has a detailed process for handling government donation requests.

• Carefully study and adhere to your jurisdiction’s lockdown regulations to reduce the risk of violations and accompanying bribe requests. Consider putting in place a process to track and report government interactions.

• Use videoconferencing, as opposed to telephone, where possible when conducting investigation interviews. This will allow you to read important non-verbal cues, share documents on-screen without providing soft copies through e-mail, and ensure interview subjects are in a secure, confidential location.

Trend: Recent Enforcement Shows Intersection Between Anti-Corruption, AML and Trade Sanctions

Recent cases show that prosecutors are increasingly combining corruption charges with other criminal offenses

AML: U.S. authorities continue to prosecute former Venezuelan officials and their co-conspirators involved in public corruption schemes using anti-money laundering laws. In 2020, DOJ brought money laundering charges against former National Treasurer of Venezueala Claudia Patricia Diaz Guillen and her huband. Diaz Guillen’s predecessor at the Treasury also pleaded guilty to money laundering charges.

AML: An Indonesian court convicted Emirsyah Satar, former CEO of Garuda Indonesia, Indonesia’s state-owned airline, of corruption and money laundering after finding that he received bribes from Airbus and Rolls-Royce in exchange for procurement contracts for aircraft and aircraft parts. Satar was sentenced to eight years in prison and ordered to pay a fine of USD 1.4 million.

Trade Sanctions: In addition to FCPA charges, Airbus entered into a deferred prosecution agreement with the DOJ to resolve allegations of conspiracy to violate the Arms Export Control Act and the International Traffic in Arms Regulations. DOJ alleged that the company made false reports to the U.S. government to facilitate the sale or export of defense articles and services.

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Trend: Coordinated Global Resolutions Reflect Increased International Cooperation, Highlight Risk to Companies

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Goldman Sachs’s 1MDB Scandal Results in Five-Country, USD 7 Billion Settlement

• U.S. authorities alleged that Goldman Sachs paid more than USD 1.6 billion in bribes to officials in Malaysia and the United Arab Emirates.

• All told, the bank ultimately paid almost USD 7 billion in penalties to regulators in the UK, Malaysia, Singapore, the U.S., and Hong Kong.

Airbus, a French Airplane Giant, Pays USD 4 Billion in Penalties in Three-Country Settlement Alleging Long-Running Bribery Schemes Around the World

• Airbus paid approx. USD 4 billion in penalties to regulators in the UK, the U.S., and France.• The key allegations focused on bribery of government officials and non-governmental airline

executives in exchange for airplane purchases. • DOJ emphasized that its “resolution recognizes the strength of France’s and the United

Kingdom’s interests over the Company’s corruption-related conduct, as well as the compelling equities of France and the United Kingdom to vindicate their respective interests as those countries deem appropriate[.]”

• The resolutions have triggered additional investigations into the alleged bribe recipients, including in markets as far as Ghana, Sri Lanka, and Colombia.

Mitigation: Coordinate Your Compliance Program and Disclosure StrategyIt’s not just the FCPA!• Compliance programs should account for global standards, not just the FCPA. • In the Airbus matter, U.S. authorities also alleged violations of the Arms Export Control Act (“AECA”)

and its implementing regulations, the International Traffic in Arms Regulations (“ITAR”).Voluntary Self-Disclosure Should be a Carefully Considered Decision, Part of a Coordinated Global Strategy

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• The Goldman Sachs and Airbus actions reflect that regulators expect self-disclosure, particularly in matters of this scope, and that self-disclosure should be considered as part of a coordinated global strategy.

• Airbus disclosed the AECA and ITAR conduct to DOJ in a “timely” manner, but disclosed FCPA issues only after it had disclosed to the UK’s Serious Fraud Office.

• DOJ specifically noted in its settlement with Goldman Sachs that it had “reached this resolution with Goldman based on a number of factors, including the Company’s failure to voluntarily disclose the conduct to the Department[.]”

Coordination is KeyIn 2020, Beam Suntory did not receive credit from the DOJ for settlement amounts paid to the SEC to resolve charges based on the same conduct because, according to the DOJ, Beam did not seek a parallel resolution.

Remember that coordinating voluntary disclosure, cooperation, and settlement negotiations with multiple enforcement agencies, including with non-U.S. regulators, may yield benefits.

Trend: Enforcement Authorities Placing Increasing Emphasis on Compliance Programs

In legislation, regulations and enforcement/prosecution decisions, authorities areincreasingly emphasizing the need for a well-developed compliance program

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SEC Rel. No. 90243 (Oct. 22, 2020)

DOJ CR. No. 20-437 (Oct. 22, 2020)

• As recent landmark U.S. enforcement actions show, authorities will not credit companies for having internal controls if they are easily circumvented. On the other hand, they have shown a willingness to credit the state of a compliance program after remediation following the discovery of misconduct.

• India and local governments in China haveintroduced new legislative amendments or regulations designed to ensure companies implement anti-corruption internal controls. Airbus SE Deferred Prosecution Agreement

(DDC Case. No. 1:20-cr-00021 (TFH)

Spotlight on MalaysiaAccording to new amendments to Malaysian anti-corruption laws, companies are deemed to have committed an offense if a person associated with the company (such as an employee or agent) makes an improper payment. The law provides a defense where companies can show they had “adequate procedures” in place despite the misconduct.

Mitigation: Establish an Effective Corporate Compliance Program

1. Is the program well designed?

2. Is the program being applied earnestly and in good faith? In otherwords, is the program adequately resourced and empowered to functioneffectively?

3. Does the program work in practice?

The updated guidance groups 12 topics and sample questions that DOJ considers relevant inevaluating a corporate compliance program.

In June 2020, the DOJ updated its guidance titled “Evaluation of Corporate CompliancePrograms.” The guidance is structured around three “fundamental questions” that DOJprosecutors should ask in assessing corporate compliance programs in an investigation, in makingcharging decisions, and in negotiating resolutions:

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1. Is the Program Well Design

Risk-Based

Whether the program is appropriately tailored to the company’s business and particular risks,in light of factors such as its locations, industries, markets, regulatory landscape, customer-base, and interactions with government officials. The 2020 update asks prosecutors toconsider how companies implement any learnings from their periodic assessments.

DOJ Will Consider:

Policies/Procedures

Whether the company has established appropriate policies and procedures (including a code ofconduct), the processes for doing so, updating and disseminating them to the workforce, andthe guidance and training provided to “key gatekeepers in the control processes.” The 2020update emphasizes the need to track how employees are accessing the policies.

Training / Comms.

The compliance training provided to directors, officers, employees (including in high-risk andcontrol functions), and third parties, as well as efforts to communicate the company’s responseto misconduct, evaluate training effectiveness, and the availability of resources to providecompliance guidance to employees.


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Mitigation: Establish an Effective Corporate Compliance Program (cont’d)

1. Is the Program Well Design

DOJ Will Consider:


The company’s reporting channels and investigative mechanisms, including theavailability of confidential channels, anti-retaliation efforts, investigative resources andindependence, investigation KPIs, and efforts to ensure that responses to findings areexecuted.

Whether the company has a risk-based third-party due diligence process that includescontrols and monitoring related to the qualifications, compensation, and work of its thirdparties. The 2020 update emphasizes the need for documenting the business rationale forengaging a third party, compliance provisions in agreements, and monitoring behaviorthrough the lifespan of the engagement.

The company’s M&A pre-acquisition due diligence and post-acquisition integrationprocesses, including its process for tracking and remediating misconduct or related risksidentified during due diligence. The 2020 update to the guidance recognizes that fulsomedue diligence may not always be possible pre-acquisition, but emphasizes that companieswill be expected to justify their approach if they conduct less than typical pre-acquisitiondue diligence.

Reporting/Investigations

Third Parties

M&A

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2. Is the Program Implemented Effectively?

The commitment by senior and middle management to a culture of compliance, includingmanagement’s messaging and actions to promote compliance and the board’s role inoverseeing compliance.

DOJ Will Consider:

Whether the compliance function has sufficient seniority, experience, resources, andautonomy commensurate with the company’s size and risk profile. Notably, DOJ will askwhether the company outsourced parts of the function to an external firm or consultant. Ifso, DOJ will probe the access the external firm or consultant has to company information.

Whether the company has clear, consistently enforced disciplinary procedures, as well aswhether and how the company incentivizes ethical behavior.

Mgt. Commitment

Compliance Function

Incentives and Discipline

2. Is the program implemented effectively?

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3. Does the Program Work in Practice?

How the company has reviewed and evaluated its compliance program to ensure it iscurrent, including changes made to the program in light of lessons learned. DOJ also willassess the internal audit function, whether the company has reviewed the program in thearea relating to misconduct, and how the company measures its culture of compliance.

DOJ Will Consider:

The effectiveness and resources of the company’s investigative function, including itsindependence, how findings are reported, and how investigations are used to identify rootcauses. Notably, this is the second instance in the updated guidance calling for DOJ toassess a company’s investigative function.

Whether the company conducts root cause analyses and takes appropriate remedial action,and whether disciplinary actions for failures in supervision were considered by thecompany.

Continuous Improvement

Investigations

Remediation

3. Does the program work in practice?

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DOJ Criminal Division Updated Guidance Key Takeaways

Starting with a Risk Assessment: A company’s compliance program should be based on the result of arisk assessment to ensure that the program is appropriately tailored.

Building on Lessons Learned: The risk profile should be “periodically updated,” and the program shouldbe reexamined and revised on an ongoing basis in light of lessons learned.

Importance of Compliance: A number of factors are considered, such as where within the company thecompliance function is housed and how the compliance function compares with other functions in terms ofstature, compensation, rank/title, reporting lines, resources, and access to key decision-makers.

Responsibility for Third Parties: The 2020 update places increased focus on a company’s third-partyoversight. DOJ will consider whether a company has appropriate business rationale for third parties. Itwill also consider the process for supplier selection and for ensuring third parties cannot be re-engagedwithout appropriate authorization once terminated.

Cascading Tone from the Top: Emphasizes a “culture of compliance.” Messaging from the top isinadequate. DOJ will consider cultural leadership by middle management and whether managers wereheld accountable for misconduct that occurred under their supervision.

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Mitigation: Establish An Effective Corporate Compliance Program (cont’d)

Trend: Recent Enforcement Actions Highlight Internal Audit Findings

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Recent FCPA enforcement actions highlight the importance of Internal Audit and the need to address issues uncovered by auditors

Cardinal Health: The SEC alleged that an audit carried out by the the compliance departmentof the company’s Chinese subsidiary identified irregularities in expenses tied to marketingaccounts. Additionally, U.S.-based executives received an internal report claiming that CardinalChina marketing employees used these funds to make improper payments to governmentofficials in China.

Novartis: The SEC highlighted internal audit findings of control deficiencies in clinical trialscarried out by Novartis’s Greek subsidiary, as well as indications that the trials werepromotional, rather than scientific, in nature.

World Acceptance Corporation (“WAC”): The SEC highlighted WAC management’s failureto support a robust internal audit function. WAC’s former CEO allegedly told an internalaudit director that she did not care whether WAC has a “world class [internal] audit function.”

Mitigation: Collaboration Between Internal Audit, Legal, and Compliance Functions

Consider whether audits should be conducted with legal oversight when sensitive topics are at issue• Involve the legal department if an audit addresses compliance with the law. Implement a policy with defined escalation steps, particularly where involving indicia of fraud,

corruption, or other legal violations. Include compliance- and corruption-related areas in your company’s regular audit rhythm.

Consider implementing best practices for a working relationship between internal audit, legal, and compliance• Confirm Legal direction and the scope of the review in a formal communication.• Keep audit issue summaries and reports strictly factual. Avoid conclusions especially when referring the

matter to another group, i.e. compliance.• Use precise wording in audit reports. Avoid sweeping or overly broad statements. Words on legal exposure, risk, and liability can be taken

out of context. Be clear about if/when findings are limited.

• Label documents appropriately. When a document contains information that is confidential, proprietary, or privileged, mark it as such. Documents not in final form should be labeled as drafts.

• Ensure that remedial steps are practical and workable, and there is a process to follow through on any action items.

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Trend: Increasing Whistleblower Activity Can Lead to FCPA-related Investigations

The SEC issued two rare awards to individuals with internal audit and compliance responsibilities:• In general, auditors and compliance officers are not eligible for

whistleblower awards. • Exceptions include when an audit or compliance officer has a

reasonable basis to believe that the company is engaging in conduct that will impede an investigation of the misconduct.

A record-breaking year

• In FY20, the SEC awarded ~USD 175 million to 39 individuals, the highest dollar amount and the highest number of individuals awarded

• After the end of FY20, the SEC issued a USD 114 million award to a whistleblower, the largest amount awarded to one individual

• Received more than 6,900 whistleblower tips, the highest number in a fiscal year and a ~130% increase since FY12

Noteble Amendments to Whistleblower Rules: • Revised whistleblower definition: In accordance with the Supreme

Court’s holding in Digital Realty Trust, Inc. v. Somers, the amendments provide whistleblower protections against retaliation only for individuals who make reports, in writing, to the SEC.

• Clarification on the types of resolutions that can be predicates for awards: The amendments clarify that various types of resolutions, including deferred prosecution agreements or non-prosecution agreements, can serve as the basis for a whistleblower award.

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In FY20, the SEC Office of the Whistleblower received tips from 78 non-U.S. countries, including 91 from Canada, 84 from UK, 67 from China, 48 from Colombia, 43 from India, and 32 from Chile.

Dodd-Frank’s Global Reach

Mitigation: Implement an Effective Whistleblower Response Protocol

Before reports are made, companies should ensure that they have a system in place to respond to whistleblowers and investigate allegations.

• Go beyond Dodd-Frank: In recent years, key markets such as India, China, Canada, and the EU have implemented or considered implementing new whistleblower protection laws.

The SEC has made clear that the fact that a whistleblower is a foreign national does not prevent an award. The SEC has awarded USD 30 million to a foreign whistleblower who provided the SEC with key, original information about an ongoing fraud.

• Review compliance and HR policies and procedures to ensure internal reporting is easy, accessible, and perceived as a corporate priority. Implement a comprehensive and organized system to catalogue and track complaints.

• Ensure that there are robust, comprehensive investigative protocols pursuant to which investigations are handled by appropriate personnel.

• Make clear that all employees, including foreign employees, who report will be treated with respect. Adopt a strict “no-retaliation policy” and communicate the results of investigations to whistleblowers to the extent possible.

• The SEC has chosen 120 days as a key milestone for investigations: the Commission will not consider information for award eligibility unless the reporter waited at least 120 days after making an internal report. Internal investigations that place a company in a position to make a disclosure decision within 120 days should be deemed presumptively reasonable.

• Consider retaining counsel. Non-lawyer personnel conducting internal investigations (e.g., compliance or internal audit personnel or external investigators) are permitted to claim awards for information gleaned from investigations in certain circumstances.

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Trend: Third Parties Remain the Single Greatest Area of Corruption Risk

Issues involving third parties have been at the core of recent enforcement actions conducted by the SEC, the DOJ, and local enforcement agencies. High-risk third parties may include:

China: Sales Agents, Clinical Research Organizations, Sham Service Providers, Consultants for Government Subsidies, PR/Marketing Firms, Travel Agents, or Distributors

India: Sales Agents, Distributors, Tendering/Procurement Agents, Government Liaison Agents, Logistics Providers, Joint Venture Partners, or Fictitious Vendors

Russia: Distributors, State-Owned Customers, Fictitious Service Providers, Vendors, or Private Customers

Latin America: Sales and Marketing Agents, Local Counsel, Customs Brokers, Lobbyists, or Tendering Agents

Africa: Business development and marketing agents

Vitol Allegedly Used Consultants to Funnel Bribes• Between 2005 and 2014, employees at Vitol Inc., a U.S. subsidiary of the Vitol

group, allegedly paid bribes exceeding USD 8 million to employees of state-ownedoil companies in Brazil (Petrobras), Ecuador (Petroecuador) and Mexico (PetróleosMexicanos).

• In Brazil, a Vitol employee established a shell company, which then invoiced Vitolfor commissions on a number of trades for which Vitol was provided withconfidential market information. These funds were then passed on to Petrobrasofficials in cash payments.

• Further payments to Petrobras employees were made through third-partyconsultants, who sent fictitious invoices to Vitol for consulting services, and thenforwarded the money to a number of Petrobras officials involved in the scheme.

• Third-party intermediaries were also allegedly used to pay bribes to Ecuadorianofficials. On several occasions, Vitol paid third-party consultants through shaminvoices received from shell companies which were controlled by an intermediaryinvolved in the scheme. The consultants then paid some of these funds to conspiringstate officials.

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Mitigation: Carefully Monitor High-Risk Third Parties

BEST PRACTICES• Identify the specific functions that are prone to corruption and handled by third parties.• Involve legal and compliance in contract negotiations/drafting to ensure that services are specifically and

accurately described and allow for an efficient control (e.g., finance) to assess whether the services have actually been rendered and whether prices are reasonable in light of those services and are in line with market rates.

• Include audit rights with a trigger in third-party agreements to allow for audits when indicated.• Conduct specific training for employees working with third parties and with end customers.• Use a risk-based approach to periodically select third parties for an audit review.• Ensure that rebates, credit notes, and other payments provided to the third party are made to the

contracting entity, including identifying any offshore arrangements.• Understand interaction between sales force in emerging markets, involved third parties (e.g., distributors,

agents) and end-customers, and conduct function-specific compliance training with these employees.• Understand whether margins of intermediaries are passed on to end-customers by reviewing publically

available tender materials or conducting audit reviews.

Third parties are an inevitable part of doing business in an emerging market. Pre-engagement screening, as well as close monitoring, can help offset the decreased transparency and control that comes with agents and intermediaries.

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APPENDIX: THE FCPA

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Overview: FCPA

• Anti-Bribery Provisions: The FCPA prohibits corruptly giving, promising, or offering anything of value to a foreign government official, political party, or party official with the intent to influence that official in his or her official capacity or to secure an improper advantage in order to obtain or retain business.

• Accounting Provisions: The FCPA also requires issuers to maintain accurate “books and records” and reasonably effective internal controls.

What is the Foreign Corrupt Practices Act?

The FCPA was enacted in 1977 in the wake of reports that numerous U.S. businesses were making large payments to foreign officials to secure business.

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FCPA: Who is Covered by the FCPA?

• Issuers: Any company whose securities (including American Depository Receipts and registered debt) are registered in the United States or that is required to file periodic reports with the SEC. • The FCPA also applies to stockholders, officers, directors, employees, and agents acting on

behalf of the issuer.• Issuers must adhere to both the FCPA’s Anti-Bribery and Accounting Provisions.

• Domestic Concerns: Any individual who is a U.S. citizen, national, or resident of the United States (not just U.S. citizens), or any business organization that has its principal place of business in the United States or which is organized in the United States.• The FCPA also applies to stockholders, officers, directors, employees, and agents acting on

behalf of the domestic concern.• Domestic Concerns must adhere to the FCPA’s Anti-Bribery Provisions.

• Other Persons: Anyone who takes any act in furtherance of a corrupt payment while within the territory of the United States.• “Other Persons” must adhere to the FCPA’s Anti-Bribery Provisions.

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Definition of “Foreign Official”

The FCPA prohibits corrupt payments to “foreign officials,” which is definedexpansively to include:

*752 F.3d 912 (11th Cir. 2014); see also U.S. v. Duperval, 777 F.3d 1324 (11th Cir. 2015).

Eleventh Circuit Adopts Broad Definitionof “Instrumentality”

In U.S. v. Esquenazi,* the 11th Circuit defined an “instrumentality” as an entity that 1) is controlled by the foreign government and 2) performs a function the government treats as its own. According to the court, characteristics of a “controlled” entity may include:• Government’s formal designation; • Government ownership stake;• Government’s ability to hire and fire the entity’s principals;• Extent to which the entity’s profits go to the government; and• Extent to which government funds the entity.Characteristics of an entity that performs a government function may include: • Whether the entity has a monopoly over the function;• Whether the entity receives government subsidies;• Whether the entity provides services to the public at large; and• Whether the public and the government perceive the entity to be

performing a public function.

• Any officer or employee (including low-level personnel) of a foreign government department or agency;

• Personnel of an “instrumentality” of a foreign government, which has been construed to include employees of government-owned or government-controlled businesses and enterprises;

• Personnel of public international organizations, such as the United Nations, World Bank or other international financial institutions, the Red Cross, and others;

• Political party officials and candidates; and

• Members of royal families.

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FCPA: What Types of Payments are Prohibited?• The FCPA prohibits not only actual payments, but also any offer, promise, or

authorization of the provision of anything of value. — No payment needs to be made nor benefit bestowed for liability to attach.— An offer to make a prohibited payment or gift, even if rejected, is a violation of the

FCPA.

• The FCPA also prohibits indirect corrupt payments.— The FCPA imposes liability if a U.S. company authorizes a payment to a third party

while “knowing” that the third party will make a corrupt payment.— Third parties include local agents, consultants, attorneys, subsidiaries, etc.

• Political or charitable contributions can violate the FCPA.

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FCPA: What Constitutes a “Thing of Value”?

• There is no “de minimis” exception.

• It is not limited to tangible items of economic value.

• It can include anything a recipient would find interesting or useful, including:

• Gifts• Sporting Event Tickets• Entertainment• Food and Wine• Meals• Internships• Professional Training

• Trips• Loans• Employment• Consulting Fees• Mobile phones and electronic devices• Education• Political or Charitable Contributions

“As part of an effective compliance program, a company should have clear and easily accessible guidelines and processes in place for gift-giving by the company’s directors, officers, employees, and agents.” -A Resource Guide to the U.S. Foreign Corrupt Practices Act (p.16).

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Upcoming Programs• January 26, 2021 webcast - FCPA 2020 Year-End Update• Date TBD webcast - 17th Annual Challenges in Compliance and Corporate Governance

Recent Programs• January 7, 2021 webcast – Privacy and Consumer Protection in the Biden Administration

Resources• Gibson Dunn FCPA Practice Group• Gibson Dunn Webcasts (CLE Credit Available)• COVID-19 Resource Center

Upcoming Programs & Resources

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