FCPA, International Cooperation, Global Settlements and Focus on Latin America
The Foreign Corrupt Practices Act of 1977 (“FCPA”) was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business.
The Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”) share enforcement authority for the FCPA’s anti-bribery and accounting provisions. The DOJ and the SEC also work with many other federal agencies and law enforcement partners to investigate and prosecute FCPA violations. For example, the DOJ regularly works with the Federal Bureau of Investigation (“FBI”) to investigate potential FCPA violations. In 2015, the FBI — in conjunction with the DOJ’s Fraud Section — announced another weapon in the battle against foreign bribery: the establishment of three dedicated international corruption squads, based in New York City, Los Angeles, and Washington, D.C.
In order to track FCPA data, Stanford Law School and Sullivan & Cromwell LLP launched in 2016 the Foreign Corrupt Practices Act Clearinghouse (“FCPAC”), a public database that aggregates and curates source documents and provides analytic tools related to enforcement of the FCPA.
Based on FCPAC data, we know the following FCPA-related facts:
- There have been 325 FCPA-related enforcement actions brought by the DOJ (76.60% resolved via settlement) and 208 enforcement actions brought by the SEC (92.58% resolved via settlement).
- There have been 371 FCPA-related corporate defendants, and 361 individual defendants.
- There are approximately 120 individuals who have served some time (prison, probation/supervised release, or house arrest) for FCPA violations. The highest sanction was 15 years in prison, and the average is ~4 years.
- Total monetary sanctions (U.S.): US$11,010,692,317
- The legal costs incurred by corporations during FCPA investigations and subsequent corporate and compliance enhancements can be a multiple of the monetary sanctions imposed by enforcement agencies. For example, Siemens AG reported incurring costs of more than $1 billion for a global inquiry into payment of bribes to foreign officials to win business. The company agreed to pay penalties of $1.6 billion to the DOJ, SEC and German authorities in 2008. Walmart has reported spending over US$880 million in legal costs and compliance enhancements in response to its alleged FCPA violations in Mexico and other countries. The investigations are still ongoing after 6 years.
New Era of International Cooperation and Coordination
International cooperation is not a new phenomenon in FCPA matters, but in recent years, it has grown exponentially. There have been an increasing number of successful multinational efforts to identify, investigate and prosecute corruption schemes. For example, in 2017, the SEC and DOJ publicly thanked 22 countries in their press releases for their assistance.
It is also important to highlight that in the United States, nine out of the top ten largest corporate FCPA settlements have involved foreign corporations. Most of these cases have been announced in the past two years.
There are at least three factors that have contributed to create this new era of international collaboration and cooperation between enforcement agencies:
- Cooperation Efforts: There seems to be a stronger institutional commitment for international cooperation between enforcement agencies. This has been facilitated by several international forums and cooperation agreements. One of the most relevant multinational forums is the Organization for Economic Cooperation and Development’s (“OECD”) Working Group on Bribery in International Business Transactions. This group was established in 1994 and is responsible for monitoring the implementation and enforcement of the 1997 OECD Anti-Bribery Convention, the 2009 Recommendation on Further Combating Bribery of Foreign Bribery in International Business Transactions and related instruments. This peer-review monitoring system is conducted in successive phases and is considered by Transparency International to be the ‘gold standard’ of monitoring. Made up of representatives from the 43 States Parties to the Convention, the Working Group meets four times per year in Paris and publishes all of its country monitoring reports online.
- Reciprocal Information Sharing: Increased international cooperation between prosecutors and regulators has helped build stronger relationships and institutional trust among agencies. This trust has allowed prosecutors and agents to have direct and more informal communications regarding evidence. In fact, a Brazilian federal prosecutor stated that informal communications via a WhatsApp chat group between enforcers around the world led to essential discoveries in the Rio Olympics bribery investigation. Historically, there were always formal processes to gather evidence, such as multinational legal assistance treaties (“MLATs”), but those channels were typically slow, bureaucratic and not very efficient. In a speech on July 19, 2017, the then Acting Assistant Attorney General Kenneth A. Blanco explained that the DOJ’s extraordinary success in Brazil was the product of a very strong collaboration and coordination with its Brazilian partners, stating that “it is hard to imagine a better cooperative relationship in recent history than that of the DOJ and the Brazilian prosecutors”. Moreover, while agents of the DOJ are stationed in Brazil, the DOJ has detailed one of its anti-corruption prosecutors to the UK’s Financial Conduct Authority and Serious Fraud Office, in another example of the growing commitment between international partners.
- Other countries are implementing and enforcing anti-bribery regimes of their own: Several countries have enacted new anti-bribery regulations and have added new prosecution tools to combat corruption. It is not sufficient to have the best anti-bribery legislation in place, it’s a matter of enforcing such laws. Examples of new regulations and enforcement tools can be found in the U.K., Canada and France. These new anti-bribery efforts have also been prominent in Latin America, as described below:
- Argentina: On November 8, 2017, the Argentine Congress passed a new law imposing criminal liability on corporations for bribery (national and transnational), influence peddling, unjust enrichment of public officials, falsifying balance sheets and reports, and other designated offenses.
- Brazil: a) On January 29, 2014 the Clean Company Act (Law №12,846/2013) took effect in Brazil, imposing civil and administrative liability on corporations that commit certain corrupt acts; b) In August 2017, the Ministério Público Federal (“MPF”) issued guidance for prosecutors negotiating leniency agreements; c) In 2015, an initiative called “Ten Measures Against Corruption” was announced by the MPF. The measures propose changes in corruption laws and criminal proceedings that would make the judiciary and prosecutor’s office more transparent, criminalize unjust enrichment of civil servants, hold political parties liable for accepting undeclared donations, and increase penalties for corrupt acts; and d) In late 2017, the state of Rio de Janeiro passed an anti-corruption law requiring companies contracting with the state to have compliance programs.
- Colombia: a) In February of 2016, Colombia adopted a new Law on Transnational Corruption; b) In 2017, Colombian President Juan Manuel Santos announced a series of measures to address corruption in the country; c) Other corruption reforms considered by Colombia’s Congress in 2017 included requiring lobbyists to disclose meetings with public officials and the creation of a registry of beneficiaries of public contracts; d) In 2017, Colombia’s Superintendence of Corporations and the Peruvian Ministry entered into a MOU to prosecute international corruption. Colombia signed a similar agreement with Spain in 2017. These new efforts are meant to assist partnering states in overcoming the difficulties of cross-border investigations, including the need to acquire evidence in foreign territories.
- Mexico: a) On July 18, 2016, President Peña Nieto signed into law the new National Anti-Corruption System; b) On July 19, 2017, Mexico’s General Law of Administrative Responsibility (“GLAR”) — an anti-corruption law that provides for administrative liability for corporate misconduct — went into effect.
- Peru: a) On January 1, 2018, Peruvian Law 30424 went into effect, introducing corporate liability for criminal offenses related to corruption, money laundering, and terrorist financing; b) The Peruvian government also modified the procurement laws to ban any company with representatives who have been convicted of corruption from securing government contracts; c) Peru also enacted harsher penalties for public officials found guilty of corruption and prohibitions on such officials from being able to work in the public sector post-conviction.
One of the new trends in the fight against corruption involves multi-jurisdictional, coordinated investigative and joint enforcement efforts between U.S. and foreign agencies. Since 2016, there are at least seven large global multi-jurisdictional resolutions between enforcement agencies from the U.S., Brazil, Sweden, Netherlands, U.K. and Singapore. Those cases included total penalties of approximately US$7,56 billion, from which US$1,83 billion correspond to sanctions paid to the U.S.
If we take the example of Brazil, a country that has become a leader in Latin America for its anti-corruption enforcement activity, we note that since the Embraer case in 2016 (first case coordinated jointly by the U.S. and Brazil), the Brazilian authorities have recovered approximately US$3,4 billion in sanctions (at least three times as much as the U.S.) in connection to five large global multi-jurisdictional FCPA resolutions reached in cooperation with U.S. enforcement agencies.
Another important element to highlight is the fact that foreign enforcement agencies have consented to the U.S. sentencing guidelines sanctions formula, consolidating perhaps an international standard. This may create a secondary effect: to increase the amount of sanctions to be paid by foreign companies to foreign authorities, since sanctions in the U.S. have traditionally been higher than in foreign jurisdictions.
FCPA Cases in Latin America
Over the past decade, there has been an increased focus on FCPA enforcement in Latin America by the U.S. enforcement agencies. Since 2008, there have been a total of 73 FCPA cases in Latin America (we use the term case as a FCPA Group: a group of one or more related enforcement actions that share a common locality, time period, and bribery scheme). Each case is counted based on the country where bribes were paid.
Two thirds of these cases (48) have taken place in just 4 countries: Mexico (16), Brazil (12), Argentina (11) and Venezuela (9). These cases have included a total of 152 enforcement actions against corporate and individual defendants, mostly in Mexico (36), Venezuela (28), Brazil (23) and Argentina (20).
In total, these cases have taken place in 15 different Latin American countries. Since 1977, there have been 96 FCPA cases and 196 enforcement actions in Latin America.
For a description of the most relevant anti-bribery and FCPA-related cases in Latin America, please see: Top 10 FCPA-Related Cases in Latin America.