One thing President Trump has really focused on since taking office is our international relations, and Trump has long been a critic of the Foreign Corrupt Practices Act (FCPA), so it’s likely that he’ll want to update the law. Some of those updates may benefit your company, while others may make doing business a bit harder.
Many companies are wondering where they should go with their FCPA compliance procedures in light of this. If Trump were to decriminalize certain overseas dealings, then would the same level of vetting still be necessary? To that, we say yes. There’s the potential that a deregulated market could be even riskier. But all of that will depend on whether President Trump can push through any major changes to the FCPA.
What’s Possible in Terms of Trump’s Impact on the FCPA?
President Trump hasn’t given an official stance on changing the FCPA, but he’s been an opponent of the law as he believes it puts American companies at a disadvantage in overseas dealings. At the same time, we need to keep in mind this is a law that’s been in effect since 1977. Repealing it entirely is impossible.
However, there are some things President Trump could do to limit the FCPA. Here are just a few actions he could take:
- Reduce funding for FCPA investigations – Investigations of overseas corruption costs millions of dollars. If Trump limits the funding given to agencies to investigate, then enforcement of the FCPA would go down.
- Appoint big business friendly enforcers – Trump already began this by nominating Jay Clayton as SEC chairman. Clayton worked previously defending major firms like Goldman Sachs and Bear Stearns, which means he’s likely to side with big business.
- Increase incentives for voluntary disclosures – About 50% of FCPA violations are a result of voluntary disclosures. Businesses get leniency when they voluntarily disclose these violations, and Trump could increase these incentives.
- Shift the focus to foreign companies – The FCPA is often used in conjunction with anti-terrorism laws to limit extremist group funding. It’s possible the brunt of FCPA investigations could be refocused on that.
Keep in mind all of this is conjecture based on the opinions of industry experts. Nothing is guaranteed and President Trump has not stated anything official regarding his plans for the FCPA. However, if he were to change the FCPA and focus on foreign businesses, it’s very likely that other countries may update their own compliance standards, making them more stringent to make up for the lack of U.S. regulation.
The FCPA is designed to prevent companies that do business with the U.S. from conducting illegal businesses in foreign countries. Also, most countries have their own compliance laws that U.S. companies are subject to. That’s why many are recommending making no big changes to FCPA compliance models.
Staying the Course With Due Diligence
There’s no way to guarantee how Trump is going to impact the FCPA, but what is guaranteed is that any changes that might be made aren’t going into effect for a while. So taking a lax approach to FCPA compliance is a mistake, firstly because there’s potential that this enforcement will stay the same. Second, even if changes are made, it’s possible that foreign markets will come up with their own laws like the FCPA to compensate. The need to maintain proper business dealings will not change. As such, businesses should continue the following:
- Overseas Best Practices – Company employees should have access to best practices for avoiding corruption and bribery in foreign markets. These best practices should give guidance on acceptable gifts, activities, and business connections when working with companies in foreign markets.
- FCPA Reporting Standards – Companies should have a reporting option for employees to disclose possible FCPA violations and potential exposure. A legal expert should also be on board to help determine if FCPA violations should be disclosed using the voluntary disclosure option.
- Key Employee Vetting Procedures – Even if the FCPA doesn’t exist, you still want highly ethical people working on your team to avoid violating any foreign laws or damage to your businesses reputation. Thorough background checks, to include fingerprinting and interviews, will be needed. In addition, Remote Risk Assessment (RRA) can be used on an annual basis to do an ethics audit of employees working in overseas markets. This RRA technology is delivered via a brief automated interview to get a look at the employee’s overall risk level for a potential FCPA violation.
Chances are, if the FCPA ends, that won’t end the risk of exposure, it will just shift that risk. Other countries would come up with legislation of their own, which would make compliance fragmented and even more difficult to manage. The key to surviving this paradigm shift will be having a consistent set of standards. If you’re already FCPA compliant, then all you have to do to protect your company is maintain those standards.
If you’d like to use RRA as a tool in this compliance, Clearspeed can act as a resource. Our RRA technology is capable of assessing employees’ risk level remotely and via telephone interview, to ensure the process is seamless and efficient. For more information on using our technology as part of your FCPA compliance program, contact us.