The term “bribery” often conjures up thoughts of large sums of money being used to sway powerful officials one way or another. But, when it comes to the rules and regulations set forth by the Foreign Corrupt Practice Act (FCPA), the terms “bribery” and “government officials” apply to a wide spectrum of actions and personnel. So, how can organizations ensure they are not unintentionally breaking any rules and putting their business at risk of an FCPA-related audit?
In today’s fast-paced business world, having a global presence is essential to stay competitive, but that leaves you exposed to more regulatory risks and fraud opportunities. Below, we’ll review the processes, procedures and tools you should have in place to help mitigate these risks and ensure you are compliant with FCPA guidelines.
Understanding the ambiguity
Anti-bribery provisions state that an organization cannot give “anything of value” to a foreign official to obtain or retain business in their market. While this seems straightforward, enforcement actions are often based on allegations around leisure activities such as travel, meals, gifts and entertainment, all of which are typically legal and socially acceptable. However, what might appear to be innocent exchanges are viewed as bribery to the FCPA.
And if that is not vague enough, the definition of a “government official” goes beyond someone who works directly for the government, and includes employees of government departments or agencies, State Owned Enterprises (SOES), healthcare providers and even third-party consultants helping with the planning of a hospitality event.
So how can your organization navigate this ambiguity – especially as you grow and expand globally and domestically – and implement the right checks and balances to mitigate risk related to the FCPA?
5 steps for FCPA compliance
1. Understand your business network. The first step in protecting against the inadvertent bribery of a government official is ensuring the employees engaging in cross-border business dealings have a firm understanding of all points of contact they will be directly or indirectly working with. In turn, leaders need to take a step back and consider how the organization works with various points of contact during the business process so they can more easily identify situations that may put them at risk of an FCPA violation.
2. Implement the appropriate controls. The knowledge and expertise of your organization’s finance and compliance teams is imperative to successfully mitigating FCPA risk. Configuring expense systems with the appropriate workflows, attendee and expense types, conditional and custom fields, and requiring manager approval before “anything of value” is purchased are key to catching potential FCPA violations before they occur. Having these types of checks and balances in place also creates an audit trail with documentation that proves your organization is doing your due diligence to prevent instances of bribery.
3. Maintain clear and correct records. The FCPA also has provisions around financial books, record keeping and internal controls that puts even more pressure on your financial teams.
When it comes to your financial books and records, you must maintain reasonable detail that accurately and fairly reflects transactions surrounding foreign officials. Anything that is falsely represented or misleading can lead to an enforcement action. In addition, internal controls must be in place, meaning you must be able to provide reasonable assurance that the transactions are properly authorized, recorded and accounted for.
4. Implement a comprehensive audit process. While these provisions are broad, creating an internal system that includes effective oversight and reporting capabilities will help maintain FCPA compliance. Build an audit process that has rules to account for regulatory violations. Consider these approaches:
- Audit receipt types and itemizations
- Audit cash expenses
- Conduct random checks
- Identify location and type of expense and where
- Verify employment and look for patterns of behavior
- Use a third-party auditor to maintain credibility and help your finance teams scale
5. Education around clear policies. While preventative measures and audits are essential, don’t underestimate the importance of proactive education. Ensure your finance team is properly trained and has a firm understanding of what constitutes both bribery and foreign officials. In addition, build clear, easy-to-understand organization-wide policies around what is and is not permitted when it comes to working with foreign officials to ensure everyone is on the same page and maintains compliance.
Knowledge is key
Maintaining FCPA compliance boils down to having the proper knowledge surrounding what the FCPA considers bribery to a foreign official, and building the appropriate policies to combat that. Ensuring you have the right knowledge, systems and tools in place gives your finance team, and organization, what they need to be successful in reducing FCPA risk.
To learn more about FCPA compliance, please watch the webinar: Strategies for Minimizing FCPA Risks Associated with Corporate Hospitality.