Updated U.S. bribery law guide reinforces broad view of accounting provisions
09 Jul 2020

The second edition of an influential handbook on the U.S. Foreign Corrupt Practices Act incorporates nearly eight years of developments in the antibribery law. It also clarifies the government’s view on controversial aspects of the statute’s enforcement.

The U.S. Department of Justice and U.S. Securities and Exchange Commission released the first edition of the guide in 2012 to educate companies about the FCPA, which prohibits businesses with ties to the U.S. from paying bribes to foreign government officials. The DOJ and SEC share responsibility for enforcing the FCPA.

Since then, the agencies have broken the record for the largest corporate settlement under the FCPA several times over, and other countries have passed or strengthened their own anticorruption legislation, resulting in the rise of internationally coordinated resolutions.

The latest edition of “A Resource Guide to the U.S. Foreign Corrupt Practices Act,” released Friday, includes more than 2,600 tweaks in both form and content. It summarizes changes to enforcement policies over the past eight years; lists new partner agencies; provides fresh, anonymized studies of FCPA cases; and updates government practices based on high-profile judicial rulings.

It also obliquely responds to criticism of the government’s application of the law.

Broad view of accounting provisions

The FCPA contains three provisions: one that prohibits bribes by companies that fall under its jurisdiction and two that deal with corporate accounting. The new guide contains additions that speak to criticism in recent years about how the SEC in particular enforces the accounting provisions.

The provisions require companies to maintain accurate financial records and accounting controls. In many cases, the SEC will allege that a company violated the FCPA by failing to meet the requirements of one or both of these provisions, even if it is unable to definitively prove that a suspect payment was a bribe that reached a foreign official.

Defense lawyers have criticized the regulator, which brings civil claims under the FCPA, for conflating what the law refers to as internal accounting controls with a compliance program more broadly.

“Although a company’s internal accounting controls are not synonymous with a company’s compliance program, an effective compliance program contains a number of components that may overlap with a critical component of an issuer’s internal accounting controls,” an addition in the guide reads.

The guide warns companies that their internal accounting controls must take into account operational realities, including the nature of their products or services and how they get to the market.

The additional language appears to signal that the SEC will continue taking an expansive view of internal accounting controls, said Jennifer Saperstein, a partner at law firm Covington & Burling LLP.

The SEC declined to comment on the new guide.

Making the best of legal setbacks

The past eight years have brought a handful of court rulings narrowing the U.S. government’s interpretation of the FCPA. The guide explains what the rulings mean for companies.

For the SEC, the main developments have been two Supreme Court rulings that limit the regulator’s ability to claw back the profits of alleged misconduct, known as disgorgement. The guide also addresses an appeals court decision in a case against a former Alstom SA executive that could restrict who prosecutors can charge criminally with conspiring to violate the FCPA.

By Dylan Tokar, The Wall Street Journal, 8 July 2020

Read more at The Wall Street Journal

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