The Association of Certified Financial Crime Specialists (ACFCS) is a worldwide organization for private and public sector professionals who work in diverse financial crime disciplines.
I recently had the pleasure to engage with ACFCS’s audience in this Q&A on various aspects of the current FCPA enforcement landscape.
The substantive portions of the interview are set forth below.
What is the biggest challenge facing FCPA enforcement?
The biggest challenge is how to enforce the FCPA consistent with commonly accepted rule of law principles. In this so-called new era of FCPA enforcement, the DOJ and SEC largely occupy the role of prosecutor, judge and jury all at the same time given that most FCPA enforcement actions are resolved in the absence of meaningful judicial scrutiny. In the rare instances when DOJ and SEC enforcement theories are subjected to judicial scrutiny, the enforcement agencies have an overall losing record when put to its burden of proof. In short, in a legal system based on the rule of law, quality of enforcement matters more than quantity of enforcement, however most observers of the FCPA seemed to be focused on the later rather than the former.
Is there any low hanging fruit the government has not applied FCPA to? Who should they be going after?
Effective law enforcement requires the prosecution of culpable individuals. The DOJ and SEC recognize this. However, the fact remains most FCPA enforcement is corporate only. Approximately 75% of DOJ corporate FCPA enforcement actions lack related charges against company employees and approximately 80% of SEC corporate FCPA enforcement actions lack related charges against company employees. One response to this wide gap might be: “why was nobody charged?” I submit that the more appropriate response is: do corporate enforcement actions resolved via NPAs / DPAs or administrative settlements always represent provable FCPA violations. In my opinion the answer is no.
Why can’t they go after these cases that they should be?
If the DOJ and SEC would prosecute more individuals, enforcement agency theories would likely be subjected to greater judicial scrutiny and the enforcement agencies, as is often the case, would likely lose. So instead of exposing its aggressive enforcement theories to judicial scrutiny and perhaps losing the leverage of the theory against business organizations, the enforcement agencies exercise their leverage against risk-averse business organizations to secure settlements. For more information about this dynamic, see my article “The Facade of FCPA Enforcement.” This article was written in 2010 and the troubling facade has only increased since then.
Are there any other countries that the US could look to as an example of effective anti-corruption enforcement?
There are approximately 40 other nations that have FCPA-like laws. However, comparative enforcement statistics are practically meaningless because it is like comparing apples to oranges for at least two reasons.
First, the U.S. is rare in having so-called respondent superior liability in which a business organization can face criminal or civil liability based on the conduct of any employee or agent to the extent the conduct was within the employee or agent’s scope of employment/agency and was intended, at least in part, to benefit the business organization. In contrast, most other countries with FCPA-like laws either: (i) do not recognize legal person liability; or (ii) if they do only allow such liability to the extent conduct was engaged in by so-called ‘‘controlling minds’’ of the business organization such as board members or executive officers. Against this backdrop, it is not surprising that the country with the most lenient form of business organization liability—the U.S.—has the most enforcement actions.
Second, the U.S. is rare in resolving alleged FCPA violations via NPAs, DPAs or administrative actions. In contrast, in nearly every other country with FCPA-like laws law enforcement agencies must do something that may be considered old-fashioned by current U.S. standards—and that is prove actual legal violations to someone other than itself.
Why is it hard to prove bribery? What makes it a nebulous type of crime?
I don’t think that proving bribery is any more difficult than proving any other crime. Indeed, a federal court judge recently blasted DOJ rhetoric about this very issue.
When the DOJ marshals the full resources of the government against a person (whether that person is a “legal person” such as a corporation or “natural person” like you and me) it should be difficult, it should not be easy. This is what our “founding fathers” specifically contemplated as a necessary bulwark against a tyrannical government.