From FCPA to Export Compliance: Avoiding the Slippery Slope to a Compliance Violation

The second half of 2013 saw the continued expansion of FCPA enforcement by the DOJ and the SEC.  The decrease in the scope of protections afforded to whistleblowers will lead to an increase in the number of FCPA potential violations reported to the U.S. government.   The increase in  compliance violations reported to the government will likely lead to an increase in export violation prosecutions.  I say this because once an FCPA investigation begins the facts often show weak compliance in other areas such as export control compliance.    And, the penalties are getting crazy.  For example, Avon recently submitted a revised filing estimating that the FCPA-related fines levied against it would amount to $132 million.  I am speechless about this.  Avon isn’t selling missile detection systems.  Cosmetics is obviously a more competitive business than I realized.

Additionally,  it isn’t just the United States government you have to worry about.  If you do any business in the U.K, the U.K. Bribery Act  also applies to you with its strict liability provisions. The U.K. Act, has only one mitigating factor and it’s a robust compliance program meeting the Act’s requirements.   Starting on February 24, the United Kingdom will have the option of using deferred prosecution agreements (or DPAs) to enforce the UK Bribery Act 2010.  DPAs, already in use in the United States, seek to incentivize corporations under investigation by offering a negotiated resolution in return for cooperation with the investigation. They also provide a form of supervision of the remedial measures undertaken by a corporation after a violation occurs: if a company fails to implement the changes it agreed to, the government can revisit the “deferred” criminal case against it. And then there is the “imbedded probation agent” that the government assigns to a corporation which is like having an IRS agent camping out in your internal audit department.

So what is the point?  Don’t limit your focus to your anticorruption program.  An audit of an exporter arising out of a potential FCPA violation may unearth unrelated inconsistencies that lead to additional headaches.  To avoid this slippery slope in the event of an unforeseen FCPA investigation, you must have an up to date export compliance manual and licensing records sufficient to survive a thorough audit of all of the company’s practices, not just those related to bribery.  Can you easily put your hands on your training attendance sheets,  your list of product classifications and your anti-boycott procedures? If not, consider some spring cleaning and reorganization.

As State and Commerce continue to rollout the President’s Export Control Reform Initiative in stages, there is an increased likelihood that inadvertent errors will occur as employees scramble to familiarize themselves with changing regulations during this period of transition. By ensuring that your company implements and maintains up-to-date anticorruption and export compliance programs, you are insuring yourself against the possibility of a minor inadvertent error leading your company down a slippery, costly, and potentially embarrassing slope.