The importance of an effective compliance program under the Foreign Corrupt Practices Act

Both Morgan Stanley and Ralph Lauren demonstrate the government’s recognition of cooperation and compliance

Enforcement of the Foreign Corrupt Practices Act (FCPA) remains vigorous and has recently targeted more individual corporate representatives than ever before. The U.S. government's response to the high profile Morgan Stanley and Ralph Lauren matters demonstrates that effective compliance and self-reporting can actually serve as a shield against criminal and civil prosecution. It has long been a maxim that a proactive compliance program provides companies with significant benefits, both external and internal. It is now apparent that the government expressly considers whether a company maintains a robust compliance program in determining whether to bring criminal and civil charges for violations of the FCPA.

The FCPA consists of two key mandates: the anti-bribery provision prohibits a company from bribing a foreign official to obtain or retain business; while the "books and records" provision requires companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation, and devise and maintain an adequate system of internal accounting controls. While the concepts are simple, creating and maintaining an effective compliance program is challenging and requires a strong commitment from all levels of the corporation. As Carlo di Florio, director of the SEC’s Office of Compliance Inspections and Examinations, aptly explained, compliance “is not a responsibility that stops at the desk of the [chief compliance officer].” An effective compliance program should assist companies in detecting and preventing improper conduct, as well as mitigate the cost of any undetected behavior which has led to violations.

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Patrick Haggerty

Patrick Haggerty is a partner with ALFA International member firm Frantz Ward LLP in Cleveland. A founding partner of the firm, he advises clients on...

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