On February 14, 2018, another major financial institution disclosed that it is under investigation for possible violations of the Foreign Corrupt Practices Act (“FCPA”). This disclosure comes at a time when the Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”) continue to scrutinize the hiring practices of financial institutions in and with respect to their Asian markets.
Investigations of Financial Institutions Operating in Asia
In its earnings statement, the financial institution announced that the DOJ and the SEC are investigating its “hiring practices in the Asia Pacific region and, in particular, whether [it] hired referrals from government agencies and other state-owned entities in exchange for investment banking business and/or regulatory approvals” in violation of the FCPA.1 In November 2016, a similar financial institution and its Hong Kong-based subsidiary agreed to pay the SEC, the DOJ, and the Federal Reserve Board $264 million to settle charges that it violated the FCPA by hiring unqualified employees referred by government officials, particularly those with connections to upcoming transactions.2 Other financial institutions have been investigated for similar practices in the region.3Continue reading “Financial Institutions’ Hiring Practices under the Microscope: The Importance of Anti-Corruption Programs”
The single most frequently asked question by our international clients over the past several months is whether there will be changes in white collar prosecution priorities under the new administration, specifically with respect to the Foreign Corrupt Practices Act (“FCPA”). The FCPA, which criminalizes the payment of bribes to foreign officials around the world, has been subject to enforcement trends and scrutiny during its 40-year history. Prior to 2005, there were few notable prosecutions. However, over the past 12 years, the law has garnered much attention given the unparalleled increase in the number of prosecutions and the headline-grabbing monetary amounts of the settlements. This trend has straddled administrations from both sides of the aisle.
Of course, it is nearly impossible to answer the question posed directly with any degree of certainty. Venturing to do so would require reading tea leaves. However, there are certain indicia and reasoning that can guide our understanding of the direction that the new administration may be heading in.
Any company doing business abroad is subject to the long reach of the Foreign Corrupt Practices Act (“FCPA”). Small or privately-held companies, just like large or public companies, are subject to the criminal specter of the FCPA. The operative inquiry is whether the company is operating and/or transacting any type of business abroad with the government, government owned entities, or involving foreign officials—either directly, through joint ventures, or indirectly, through agents. A foreign official also includes employees of entities owned by the government. Continue reading “The Global Anti-Corruption Corner: A Primer to the Foreign Corrupt Practices Act”
Global financial services firms should be aware that the DOJ and SEC are committed to identifying and investigating bribery and corruption regardless of the form it takes. With increased resources to help identify the most sophisticated bribery schemes, financial service firms must ensure that their robust anti-corruption programs take into consideration local customs and risks as well as the broad nature of “anything of value” and its interpretation by regulators.
In the past few months, the U.S. Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”) announced enforcement actions against two financial institutions stemming from violations of the Foreign Corrupt Practice Act (“FCPA”), each resulting in settlements in the hundreds of millions of dollars. In September, the DOJ and SEC announced a total payment of approximately $412 million for a hedge fund’s use of intermediates, agents, and business partners to pay bribes to high-level government officials across Africa. In November, a $264 million settlement was announced involving a major bank for hiring interns and full-time employees who were friends and family of Chinese officials in exchange for winning lucrative banking deals in China. These resolutions should remind us that no industry is immune from the reach of the FCPA and that companies should be well-aware of the customs and risks of the regions where they operate so that their compliance measures adequately address these risks. Continue reading “Financial Services Firms Must Evolve Anti-Corruption Programs in Light of Recent FCPA Settlements in Excess of $100 Million”