Compliance Clampdown On Bribery

Critics have called the Foreign Corrupt Practices Act ambiguous, and they claim it lacks judicial oversight. In November, 2012, the Department of Justice and the SEC jointly published 130 pages of long-awaited guidance, informing stakeholders of how the FCPA would be interpreted for prosecution. Shortly after those guides were issued, Eli Lilly was hit with an unprecedented fine of more than $20 million for making improper payments through foreign subsidiaries to government officials.

The Eli Lilly case illustrates that operating in foreign markets requires detailed due diligence in order to avoid exposure to the FCPA. Organizations with particular vulnerability are those with overseas operations that embrace global supply chains and networks of intermediaries, including agents, distributors or brokers. The FCPA prohibits companies from paying an agent or intermediary, knowing that money would likely be transferred to a foreign official to gain an improper advantage.

The author provides a due diligence checklist to address DOJ and SEC concerns about how companies are vetting potential business partners, putting risk-based protocols in place and scrutinizing agents or intermediaries based in locations with a high degree of corruption. The checklist items include initial vetting, risk assessment, contract processes and clauses, and continuous monitoring on either a scheduled or ad hoc basis. No two companies have the same systems, the author notes, and there is no uniform approach codified by law. It is up to companies to take measures to fit their business structures.