Background: A Resource Guide to the U.S. Foreign Corrupt Practices Act
On Nov. 14, 2012, with input from the Departments of Commerce and State, the Criminal Division of the U.S. Department of Justice (DOJ) and the Enforcement Division of the U.S. Securities and Exchange Commission (SEC) released A Resource Guide to the U.S. Foreign Corrupt Practices Act (the “Guide”). Identified by DOJ and SEC leadership as an “unprecedented undertaking,” the 120-page Guide represents the agencies’ most significant attempt to date to clarify, aggregate and expand upon the guidance currently available regarding the agencies’ U.S. Foreign Corrupt Practices Act (FCPA) enforcement approach and priorities. According to the SEC, the Guide provides a “detailed analysis” of the FCPA and closely examines “the SEC and DOJ approach to FCPA enforcement.”
The Guide addresses a wide range of topics, including who and what is covered by the FCPA’s anti-bribery and accounting provisions; the definitions of “foreign official” and “instrumentality”; what constitutes proper and improper gifts, travel, and entertainment expenses, as well as “facilitation payments”; and the different types of civil and criminal resolutions available in the FCPA context. The Guide also attempts to explain the concepts of “successor liability” and “parent/subsidiary liability” while highlighting the need for risk-based due diligence and reaffirming the importance of implementing an effective FCPA compliance program. Finally, the Guide conveys the agencies’ recommendations and illustrates how a business or individual may decrease the chance of being subjected to an enforcement action. It does so by providing hypotheticals, examples of enforcement actions, summaries of applicable case law, and explanations of matters that the SEC and DOJ have declined to pursue. While the Guide provides quite a bit of information, it does not delve into the cultural and linguistic challenges associated with due diligence and compliance. We’ll take a look at how using the Guide, outside counsel, and consultancy of a language services provider (LSP) can help you put together a thorough plan of attack.
Examining the Guide’s practical limitations
To minimize a company’s risk of being subjected to an enforcement action, a company must first understand who and what is covered by the FCPA and what types of conduct are likely to lead to enforcement actions. Here, the Guide, in connection with the advice of experienced legal counsel, can serve as a useful resource. The Guide explains basic FCPA concepts, provides universal definitions, and illustrates the agencies’ enforcement approaches and priorities for several common scenarios. It is not without practical limitations, though. For instance, the Guide does not answer or address every question a company might have about the requirements and applicability of the FCPA. And, taken alone, the Guide cannot provide a company with a complete and accurate assessment of the risk that it will be subject to under an FCPA enforcement action. Further, even if the Guide’s recommendations were fully comprehensive, the Guide could not tell a company if it had “done enough” to satisfy the Guide’s recommendations. Finally, the Guide also does not provide guidance on how to implement the remedial and preventative measures that it recommends, nor how to do so in an effective, cost-efficient manner. These are issues for which companies must use their own resources to fashion individualized, effective solutions.
Even when a company tries earnestly to implement the Guide’s recommendations, difficulties may arise. For one, a company may struggle to determine whether its efforts have been truly effective. Second, many of the Guide’s recommendations require the dedication of significant resources (e.g., conducting risk-based due diligence, creating and implementing effective compliance programs, developing and providing training to employees and third-parties, and engaging in periodic audits.) Thus, not only may the company find it challenging to gauge the effectiveness of its efforts, the company may have valid concerns about whether it is using its resources prudently and keeping costs contained.
These issues are significant, but they are not insurmountable. One area to explore in order to get the most from the Guide’s recommendations is a specific area of difficulty: cultural and linguistic variables.
Cultural and linguistic variables: Address them now, reduce risk
“Cultural variables” and “linguistic variables” are each broad concepts. Cultural variables might include differences in expectations between members of one culture and those of another. For instance, an individual in India might have a different understanding of what constitutes a common business practice than someone from the United States. Specifically, that individual, in part because India has ranked highly on the corruption index, might characterize bribes as a normal part of doing business. Further, individuals from certain cultures might respond differently to different types of training or presentation of information than persons from other cultures. As an example, because of their widespread familiarity with advanced technologies, individuals from certain geographic areas might be more comfortable receiving online training than individuals in other geographic locations, who might respond better to a face-to-face presentation. Cultural variables could also include variations of specific business or social customs (e.g., gift giving.)
Linguistic variables encompass a myriad of issues dealing with language translation. For instance, differences between speakers of different languages—and even different dialects—can change the meaning of key terms. Additionally, even in circumstances where individuals are capable of speaking the same language (e.g., the speakers are bilingual), they might be most comfortable communicating with someone in their native language during tense situations.
So, how are these cultural and linguistic differences relevant to the Guide and to staving off enforcement actions? For one, these variables may diminish the accuracy and effectiveness of communication within the company’s operations, the accuracy with which the company gauges the effectiveness of its risk-mitigating efforts, and the understanding the company has of its present and potential exposure to possible FCPA enforcement actions. If these cultural and linguistic differences are not addressed, companies may be at an increased risk of being subjected to an FCPA enforcement action. In addition, cultural and linguistic differences can create confusion or miscommunication during the course of investigations. In these scenarios, accuracy and impartiality are key. Mix-ups could lead to significant consequences.
In Part II, we’ll look at some of the real-life international situations in which challenges often arise due to these variables, and from there, expand on the most effective resources companies have at their disposal to mitigate any potential problems.