Foreign Corrupt Practices Act(FCPA) & Covid-19

With the revolutionary shifts in global supply chains most of the companies are trying to maintain or restore production level quickly by either identifying an alternative suppliers without a robust due diligence or by continuing with existing suppliers which eventually results in bribery or other unlawful acts.

Q1. What is FCPA?

The Foreign Corrupt Practices Act (FCPA) is a U.S. statute that prohibits firms and individuals from paying bribes to foreign officials to further business deals. Both the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) are responsible for enforcing the FCPA

Q2. Whom it is applicable to?

Applicable to the U.S. companies, their employees, officers, directors and agents.

Q3. How to implement?

1. Conduct a Baseline Risk Assessment:

• National & International Risk: Identify of all aspects of the business that operate overseas or otherwise have dealings with foreign officials and identify reputation for corruption of the countries in which the organization does business
• Transactional Risks: Identify all employees and agents who interact with foreign or local officials and the types of transactions they engage in. Check if any employee or agent is politically exposed or making charitable contribution to get license or permit in form of gifts, meals, travel, and entertainment etc.

2. Segregation of duties:

• Clearly identify Compliance owner, Control owner , Risk Manager , Audit Committee and roles and duties they are entitled to follow:

3. Develop a culture of Compliance:

• FCPA and anti-corruption policies, standards, and procedures, controls should be developed and should be widely disseminated, easily accessible, and specifically tailored to a particular company’s business and the particular risks associated with that business. Also, include ethics statement in the Company’s annual report and other financial or shareholder reports to spread as much as possible.

4. Training of all Stakeholders:

• Training is an essential part of any compliance program, and should be provided based upon risk-based groupings

5. Risk-Based due diligence of Third Parties:

• An effective compliance program should include appropriate risk-based due diligence of Third Parties acting on the company’s behalf. Robust due diligence includes research, questionnaires, interviews, background checks & relevant financial information analysis etc. to find out if the Third Party is not involved in Sanctions, enforcement, watch lists or Negative Media Findings

6. Standardized agreements for Third Parties:

• The company should include standard provisions in contracts with Third Parties that are reasonably calculated to prevent and detect FCPA violations.

7. Periodic Audit & Risk Assessment:

• The compliance program should include periodic audits and risk assessments to ensure continuing compliance with, and successful implementation of, FCPA and other anti-corruption policies, standards, and procedures, including a thorough and thoughtful assessment of the areas of risk based upon the company’s scope of operations, business models, geographic locations, degree of interactions with foreign officials and state-owned entities, use of Third Parties, gifts, travel expenses, entertainment expenses, charitable and political donations, and so forth.