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Prosecution of Financial Executives Under the FCPA: The Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act (FCPA) is a landmark piece of federal legislation. The FCPA deals with payoffs and kickbacks made by certain kinds of financial service professionals to foreign government officials relating to securing more business. In recent years, compliance and enforcement agencies such as the SEC have seemingly increased their focus under this law on the domestic financial services industry, and the actual banks and executives themselves. One of the two key aspect of the FCPA, and the one most relevant to both you and your attorney, is the component that deals with bribery. The law prohibits U.S. Individuals and businesses from offering or providing anything of value to a foreign government official with the intent to influence, award business or gain an unfair advantage.

As recently as July of this year, the SEC announced a $29.8 million settlement with Credit Suisse relating to allegations that the bank had hired family and friends of foreign officials as a favor or benefit for receiving banking and other sources of business. The settlement would likely have been even higher if it weren’t for the fact that Credit Suisse had already paid $47 million in fines for the same exact conduct in a criminal prosecution brought by the DOJ. Similarly, in April of this year, another company entered into a settlement for more than $143 million in connection with charges under the FCPA. JP Morgan also settled similar charges for $264.4 million as recently as 2016 for criminal and regulatory penalties for very similar alleged conduct – giving jobs to family and friends of foreign government officials. In the same year, Qualcomm also settled comparable allegations for $7.5 million.

Financial firms, banks and executives in the U.S. can help to protect themselves from such allegations by making sure that all applicants for positions, especially those with any connection to foreign government officials and those with prior criminal convictions, go through the standard hiring process and that they are thoroughly qualified for the offered position. Under the FCPA, however, that is not enough for banks and financial services companies. They are required to proactively identify “Politically Exposed Persons” and those who might be potentially involved or susceptible to corruption of this nature.

Critically, compliance with the FCPA ultimately falls on the executives of a firm, particularly Human Resources and employment attorneys within the organization. This includes not only the screening and assessment practices noted above, but also ongoing monitoring and assessment of potential sources of violations of the FCPA within the organization. This includes an expectation by the SEC, Department of Justice, and other enforcement agencies on ongoing training, oversight, regular employee reviews, well-defined and established procedures for employee discipline, and appropriate engagement in internal investigations.

Internal investigations, which are expected as part of compliance with the FCPA and other regulations and laws having to do with the financial sector, are ubiquitous, complex and expensive. Avoiding any possibility of impropriety, or the mere appearance of impropriety, in how internal investigations are conducted can be difficult. For example, a financial firm or bank itself would not conduct the investigation itself for obvious conflicts of interest. It may not even be advisable for an outside firm with an strong existing relationship with the company to conduct such an investigation, not only for conflicts and appearances, but also for that law firm’s ability to continue representing the bank in other matters. All of these decisions and practices tie directly in to executives’ potential responsibility under the FCPA.

Crotty Saland PC is a New York criminal law firm founded by two former Manhattan prosecutors.

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