The FCPA itself can provide a favourable competitive business edge

January 2020 | EXPERT BRIEFING | FRAUD & CORRUPTION

financierworldwide.com

The Foreign Corrupt Practices Act (FCPA) can be a useful business development tool when dealing with government officials, customers and vendors in international markets if US parties conduct valuable training awareness programmes or seminars.

The FCPA was implemented in 1977 in response to revelations of widespread bribery of foreign officials by US companies abroad. The regulation was intended to halt those corrupt practices, create a level playing field for honest businesses and restore public confidence in the integrity of the marketplace. Most recently, the Securities Exchange Commission (SEC) has joined the Department of Justice (DOJ) in expanding the scope of what an FCPA violation means with vague, broad guidelines.

Since the inception and expansion of the FCPA, based on numerous enforcement actions, there has been a lack of concrete understanding about what exactly is required to achieve compliance.

If one thinks US multinationals are confused by the new regulation in nature and scope, one can only imagine the confusion of customers, vendors, government officials and other stakeholders within over 80 international markets who come into contact with the FCPA.

In many markets, the word ‘bribe’ in business is not a negative reactionary term, but is both respected and expected. In fact, most emerging markets across Asia, Latin America, the Middle East and Eastern Europe require a bribe of some sort in order to do business. Indeed, if some form of a gift, payment or consideration is not part of the agreement, it is considered rude and disrespectful, and business negotiation can stall. The purpose of gift-giving is to show appreciation and have people think of you when it is time to do business. It is also a means of expressing gratitude to those who support you. The gift is often treated as critical, although it is still secondary to the business deal itself.

Many emerging markets are even finding themselves in a position where they are reluctant to do business with US multinationals for not respecting local customs and norms and also because they do not understand FCPA regulations due to their complexity. Many US multinationals are losing potentially billions of dollars in business opportunities within these markets as their ‘hands are tied’ when it comes to ensuring strict FCPA compliance. All of which has led to a significant loss in revenue.

However, there is a solution which can be a ‘win-win’ for all parties, including the SEC and DOJ.

A robust FCPA and compliance and controls training programme, delivered by US companies to emerging markets customers, vendors, government officials and others can help create a better understanding of US regulations and can lead to a measurable increase in local sales and revenue.

Local, language-adapted, simple, effectively-delivered training programmes using case study interactive examples in a classroom setting can provide an essential understanding of the FCPA and compliance and controls requirements.

Private and public sector examples show that across emerging markets a robust, custom-developed FCPA training programme, in the local language with interactive case studies successfully delivered in a hotel or meeting room, will lead to increased sales and revenue and cost avoidance in the areas of government tender revenue, ease of custom clearings and accelerated regulatory approvals of products or services. These training programmes should be interactive. Walking through scenarios of various business situations or interactions between a US company and a local representative is the most effective way to learn about FCPA compliance and control guidelines. It is helpful if the training is delivered by an instructor who speaks the local market language using market-specific case studies to review, discuss and summarise learning with an assessment.

The bottom-line benefits are that FCPA regulators appreciate the training and awareness of programmes being delivered throughout emerging markets, potentially avoiding subsequent fines and actions. By creating awareness across the globe of FCPA enforcement by the SEC and DOJ, companies and individuals understand the steps necessary to do business with companies in the US.

Furthermore, learning is appreciating. Local clients, third parties and government officials enjoy learning about the FCPA and how it might differ from their local norms and culture around gifting and bribing, which may be very different from the US. Markets will appreciate that companies are taking the time to train concerned parties on a different set of rules and regulations.

Additionally, US multinationals could significantly increase revenue within emerging markets while complying with FCPA regulations as a result of the training programmes they provide. By making a country fully aware of the minutiae of the FCPA, they can avoid embarrassing situations during the business negotiation process and allow full transparency. Participants in these training programmes appreciate the time and expense US companies expend enriching their knowledge around FCPA compliance and controls. The DOJ and SEC also benefit from an understanding of the broad but complex and often counter-cultural US regulation. US companies operating in these markets play their part in teaching US regulations to multinationals. This transparency and appreciation will undoubtedly lead to improved business outcomes.

Frank Orlowski is the founder of Ation Advisory Group. He can be contacted on +1 (917) 821 2147 or by email: frank@ationadvisory.com.

Frank Orlowski

Ation Advisory Group