For U.S. companies that plan to expand their operations into other countries, there are many factors to consider. The Foreign Corrupt Practices Act (FCPA) is pervasive in its jurisdiction and is on the minds of multinational corporations. Corruption is an important concern for these businesses. According to Venkat Eswaran, senior vice president at Nair & Co., these companies need compliance programs that are tailored to each country, the type of business and other factors.
For example, in third-world countries, Eswaran says, the government is typically heavily involved in business, which increases the risk of an FCPA violation. This is due to the fact that, when a business is run by the government, the contact person for that business could be considered a government official. This underscores the need for a clear risk-based compliance program that has complete buy in from upper management.
Essential elements of an effective program, Eswaran says, involve both effective monitoring and regular, rigorous training. But the training and monitoring should not be limited to employees, as a large amount of risk (upwards of 90 percent) comes from third parties. Third parties create liabilities, and companies must be careful that these third parties understand risks such as gifts and compensation or facilitation payments.
Keeping all these factors in mind, a chief compliance officer must be sure that the compliance plan is taken seriously and that effective training programs are implemented. Eswaran also points out that CCOs should ensure compliance programs are rolled out in local languages in foreign countries and that workers are provided with specific examples to illustrate points.
On the topic of third parties, Eswaran states that due diligence is a good starting point, but it does not eliminate risk. He recommends including terms in your international contracts that allow access to third party accounts if there is an FCPA violation. Having access to these books will allow for a thorough investigation.
When expanding to other countries, Eswaran recommends checking with a group such as Transparency International, which gives companies insight into the countries in which they do business. If a company is working in an industry that is regulated in a certain country, there could be an FCPA risk, so the monitoring and training programs are once again key. The same holds true for companies that bid for government contracts; these businesses need to be aware of policies for reimbursement and what type of payments are acceptable and unacceptable.
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