The recent and very prominent media coverage of the Foreign Corrupt Practices Act (FCPA) and money laundering charges brought by the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) against employees at Direct Access Partners, a New York broker-dealer, and a senior Venezuelan bank officer highlight an important shift in FCPA and anti-bribery enforcement. The alleged payments made to secure preferential treatment and business in the Venezuelan bond markets open up a new frontier in SEC FCPA enforcement, and, as has been discussed in the FCPA blogosphere, are a vivid illustration of the expanding investigative and audit tools available to the SEC. Indeed, it is safe to conclude that periodic SEC examinations of broker-dealers and other financial services firms will no longer be the province of only audit and financial personnel at these firms. Compliance professionals and internal counsel will need to ensure that they are involved in the process.
There is an even more important observation that the recent indictment and enforcement action in Direct Access Partners punctuates. The list of industries and business sectors that must direct their compliance professionals to consider FCPA and anti-bribery laws in their business conduct and compliance programs has both expanded and evolved. To be sure, broker-dealers, hedge funds and other financial services firms need to enhance and strengthen their compliance programs and incorporate clear FCPA and anti-bribery policies and procedures, if only to anticipate the scrutiny of SEC examiners. However, this most recent result in the government’s FCPA enforcement program only further populates the expanding universe of industries that have found themselves the subject of public FCPA investigations.
It should come as no surprise that the DOJ and SEC FCPA investigative and enforcement record is now as likely to be populated by retail, technology or financial firms. Senior enforcement officials have repeatedly publicized their current priorities at various public forums, including some of the most recent conferences. One senior SEC enforcement official identified retail, consumer products, insurance, private equity and technology as areas of current emphasis in which the agency was conducting ongoing investigations. Public disclosures and media reports bear out these priorities and the changed focus.
This evolution in FCPA and anti-bribery enforcement is a natural part of the increased maturity and sophistication of compliance operations in multinational companies. Industries that have been the subject of substantial FCPA and anti-bribery scrutiny in the previous decade (e.g., defense, oil and gas, pharmaceuticals) have responded to the well-publicized deficiencies in their programs with reforms and increased emphasis on clearly written programs and policies coupled with aggressive and comprehensive training. Certainly, so long as these industries find themselves operating in challenging corners of the world, the investigative spigot will not run dry, but enforcement eyes increasingly are trained on new business sectors precisely because they operate in the same corrupt markets but without the same care and attention in their FCPA or anti-bribery compliance operations.
These developments and the transparent direction from enforcement authorities should arm compliance professionals in the newly profiled industries to seek necessary resources to address compliance deficiencies in the FCPA and anti-bribery space. Furthermore, the current and public investigations and the detailed charging documents in certain matters present a compelling argument for being proactive in addressing needed changes in compliance programs before allegations of potential misconduct bring deficiencies to light.
The recent roll call of resolutions involving Direct Access Partners, Ralph Lauren and Tyco; the public disclosure of internal or other investigations mentioning, for example, Hewlett Packard, Deere & Co. and Kraft Foods; and the stated priorities of enforcement authorities have changed the landscape for compliance professionals in these industries. These sophisticated industries can no longer take comfort in the idea that the government is not focused on them for anti-corruption issues: FCPA and local anti-bribery law compliance must now be a priority.