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FCPA and Bribery Act Compliance Post-Sarbanes-Oxley (SOX)



SOX did not materialize just as a result of the finance scandals at the turn of the century. There were a series of acts and provisions from the mid 1970’s that required Corporations to meet the modern day compliance practices. These were accomplished with various degrees of success.



Instead of going thru each act since the 1970’s, lets go thru the details and requirements of The Foreign Corrupt Practices Act of 1977 (FCPA) and see the provisions from a SOX perspective.

The FCPA was originally passed as a result of SEC investigations in the mid-1970s which uncovered questionable payments of over $300 Million to foreign officials and politicians.

Independent of prudence was required for FCPA purposes. It was proved later that prudent management judgements for compliance were either inadequate or not enough. Therefore The Sarbanes-Oxley Act of 2002, requires a system of effective disclosures, controls and procedures, a functional code of ethics, and an effective compliance program.

FCPA and Bribery Act similarities to SOX.
  • Significant fines and suspension from federal procurement contracting
  • Officers and employees have gone to prison. An organization operates through its managers and therefore is liable for the offences committed by them.
  • Firms have implemented detailed compliance and training programs.
  • Requires companies with listed securities in the U.S. to meet its accounting and internal control provisions, policies and procedures.
  • Auditing and monitoring of internal controls with results reported to the Audit Committee, and enforcement of discipline.
  • Companies should have very high levels on internal control policies in place when dealing within particular countries.
  • U.S. and UK parents may be held liable for the acts of foreign subsidiaries where they authorize or direct the activity
  • Illegal to utilize a third-party conduit.
  • Obtain the agreement of other countries to enact similar legislation.
  • Unusual payment patterns in terms of high consulting, promotional, advertising or contribution expenses
  • Standardized contracts should be reviewed for any departure from norms.
In summary, a team needs to be created to guide a corporation through implementation of the FCPA compliance process. Sarbanes-Oxley types of controls need to be established at a variety of levels. A clear corporate policy with assignment of responsibility with a senior information or compliance officer is required, initial and annual training of appropriate personnel is essential, anti-bribery clauses need to be in all foreign consulting contracts, and sub-certifications of internal controls need to be addressed quarterly particularly in foreign subsidiaries after the compliance program is initiated. FCPA violations can have severe impact on publicly-held corporations in addition to civil and criminal penalties. FCPA violators can be barred from federal purchases and contracts, and adverse public relations including derivative lawsuits could be the consequences of a no-action policy.