The Foreign Corrupt Practices Act (FCPA) prohibits U.S. businesses from bribing foreign officials and requires public companies to, among other things, maintain accurate books and records. Although the FCPA has been around for more than 20 years, regulatory oversight and enforcement action have intensified as a result of public outcries against corporate excess and corruption. Businesses with an international presence have come under increasing scrutiny, not only because of the FCPA, but due in large part to the auditing and disclosure requirements stemming from the Sarbanes-Oxley Act of 2002 (SOA).
By strengthening the accuracy and effectiveness of financial reporting, SOA has caused management to identify potential violations of the FCPA that might otherwise have gone under the radar. International enforcement has likewise increased, as more foreign governments have joined the Anti-Bribery Convention ratified in 1999 by the Organization for Economic Cooperation and Development (OECD). Now accounting irregularities, accusations of bribery and FCPA violations receive widespread coverage by the news media.
Most businesses do not engage in international operations or sales with the intent of committing bribery. Instead, inadequate training and monitoring of international sales forces, consultants, subcontractors or partners creates an environment where borderline activities or outright corruption can occur regularly, yet remain hidden.
This issue of Litigation and Fraud News discusses red flags, vulnerable industries and activities, and the components of an effective compliance program.
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