Cross-border cooperation to combat corruption on the rise

Feb 20, 2015
<p>Enforcement agencies worldwide signaling companies must more aggressively police themselves to avoid stiff penalties</p>

The fifth annual Global Bribery and Corruption Review from global law firm Hogan Lovells forecasts more aggressive enforcement actions by the SEC and Department of Justice as the fight against bribery and corruption intensifies. The report, released last week, highlights a robust year of enforcement involving some of the most high-value FCPA fines in history, increased focus on bribery and corruption in Africa, and overall tighter scrutiny on multinational corporations and banks.

During 2014, newly confirmed US assistant attorney general Leslie Caldwell led the charge for more aggressive enforcement of the FCPA, continuing to emphasize corporate compliance and cooperation with the government to stop bribery and corruption. There were 24 FCPA enforcement actions taken by the DoJ in 2014, up from 13 in 2013.

Meanwhile, the SEC took eight actions, versus 12 the previous year. Among those cases was Alcoa World Alumina’s $384 million settlement of charges that two of its subsidiaries had bribed government officials – the fifth largest settlement of all time. With Mary Jo White at the head of the SEC, last year the agency used its administrative process to secure settlements in all of its corporate enforcement actions rather than relying on civil complaints filed in the courts. Both the SEC and DoJ have encouraged corporations to self-report wrong-doing -- and the report says at least two companies that self-reported violations avoided major fines and penalties last year.

The global emphasis on fighting bribery and corruption is driven by two factors, according to Hogan Lovells partner Stuart Altman, who co-edited the report. First, ‘countries that previously have not put a lot of effort into anti-bribery and corruption efforts have seen that attracting foreign investment and growing their economy hinges at least in part on creating an environment where companies feel comfortable.’ Second, Altman notes that the success that greater emphasis on stopping corruption has had in producing headline-grabbing settlements has inspired many countries to beef up their enforcement agencies, particularly in Europe and Asia. A healthy competition has emerged because countries don’t want to be seen as havens for corruption. ‘They want to be seen as meeting the challenge,’ Altman says.

The report also says regulators are beginning to view FCPA violation as a potential foreign policy risk for the US. As a result, you can expect ‘greater scrutiny of corporate business dealings in politically unstable countries,’ and increased attention to uncovering bribery schemes ‘in countries where official corruption has the potential to significantly compromise the United States’ long-term foreign policy interests.’

In addition, the report says the severity of an FCPA penalty could be determined by ‘the degree to which the bribes might have negatively impacted the fairness of the foreign country’s political and economic systems in relation to its citizenry.’ The broader message is that an environment of bribery and corruption can prevent critical resources from getting to a nation’s citizens and adversely affect a country’s economic growth.

Some of the foreign policy concerns about the effects of bribery and corruption have surfaced in Africa and other emerging markets. The report points out that five of the ten countries rated ’most highly corrupt’ in Transparency International’s 2014 Corruption Perception Index are in Africa. These countries have generally shown a spike in bribery and corruption cases, and experts believe the increase in African countries is largely because they are paying greater attention to the corrupt practices of corporations.

Altman says that companies should expect greater scrutiny of bribery and other corruption violations across the globe in 2015.

‘As more and more countries understand the importance of enforcement efforts, we have seen the growth of global cooperation,’ he says. ‘There is both a formal and informal network for prosecutors in various countries to communicate with their counterparts. The result is that an enforcement action in one country is likely to have collateral effects in another.’

For example, US regulators are paying closer scrutiny to bribery and corruption at banks and multinational corporations, the report says. That’s spurred other nations to increase their enforcement efforts toward banks and multinationals.  

Altman says that regulators in the US and abroad have become more aggressive and want companies to go beyond just having anti-bribery and compliance programs. ‘What we see is the regulators really looking for companies to take the next step – to go beyond simply having a program, to demonstrating how they’ve made sure it is working, how they’ve tested it and how they’ve increased the level of attention they’ve been paying [to corruption].’

He believes regulators are sending a signal that companies need to be aggressive about policing themselves or else they will be slapped with significant penalties. All companies must improve their anti-corruption efforts in 2015.

‘It highlights the need for a global anti-bribery policy and compliance program,’ says Altman. ‘Your efforts have to be coordinated across jurisdictions and you have to create a program that works for your company in all the places that you do business.’

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