We are at a pivotal point in the global fight against corruption, with new allegations surfacing daily that implicate the world's most powerful individuals and organisations.
World leaders, in particular, are pledging to clean up politics and the public sector by clamping down on corruption. In 2015, we saw a global purge, with senior political and business figures pursued and indicted. In China, president Xi Jinping continues to oust corrupt senior government and public figures, while in Nigeria, India and Guatemala, leaders elected on the back of promises to root out public sector corruption are showing their mettle too.
In geographies synonymous with corruption, notably Africa, Central Asia and South America, significant deals in infrastructure, construction and natural resources are beginning to collapse. Charges of bribery and corruption are rife among third-party consultants and agents who brokered deals, while some multinational companies, pleading ignorance of local customs, are being investigated and indicted too.
Far-reaching power of FCPA
The US, under the auspices of its Foreign Corrupt Practices Act (FCPA), is aggressively pursuing bribery of foreign public officials. Aside from US citizens and companies, the FCPA targets non US-based persons and companies that meet on US soil or even transmit funds or emails outside the US, which cross a US-based account or server, with the purpose of making a bribe to obtain or retain business. Fines are colossal, putting corporates worldwide on their guard. But individuals are under siege too. The 2015 Yates memo obliges corporations to turn over evidence of persons involved in 'corporate wrongs' or jeopardise cooperation credit.
Trends in FCPA enforcement
SEC/ DOJ enforcement actions: 2005 - 31 October 2015
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The Department of Justice (DOJ) and Securities and Exchange Commission (SEC) are responsible for enforcing the FCPA. 2015 saw a relatively sharp drop in enforcement actions. However, this should not be construed as a move away from enforcement activity by the DOJ. Recent public statements indicate that FCPA violations will continue to be pursued aggressively by the DOJ, with a focus on individuals as well as high-impact cases.
SEC/DOJ penalties, disgorgement and interest: 2005 - 31 October 2015
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The dip in the number of actions commenced by the DOJ this year contrasts with the surge in financial recovery by both the DOJ and SEC over the same period. A relatively modest combined recovery, by way of penalties, disgorgement and interest in 2014, has been reversed this year, with a sharp uptick in settlements. There have been a number of guilty pleas entered by individuals, as well as some notable declinations, marking the conclusion-without-charge of some long-standing corporate investigations.
SEC/DOJ enforcement actions by region: 1 July 2014 - 31 October 2015
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Asia has remained the geographic focus for FCPA enforcement in 2015. In fact, of the 100 or so companies reportedly under investigation by the SEC or DOJ, approximately 40 involve companies operating in China. There was also an increased focus on activity in the Middle East in 2015, up around 10% on the equivalent period in 2014.
Unlimited fines in the UK
The UK Bribery Act promises to have a major impact in the fight against corruption. It covers offences relating to bribing other persons (including a specific offence of bribing public officials) and acceptance of a bribe. The Act covers those actions occurring in the UK and those undertaken outside the UK by persons with a 'close connection' to the UK.
Under section 7 of the Act, a company can be held liable for failing to prevent its associated persons (such as employees, agents or others who perform services on its behalf) from paying bribes to obtain or retain an advantage for the company. It is a defence if the company had "adequate procedures" to prevent bribery by associated persons.
Individuals who breach the Act can expect unlimited fines or up to ten years' imprisonment. Companies failing to prevent bribery by an associated person under section 7 of the Act are also subject to unlimited fines, which will be calculated in accordance with the Sentencing Council Guidelines for Corporate Offenders.
In fact, we have recently seen the first judicial disposal of section 7 Bribery Act offence and first Deferred Prosecution Agreement (DPA) in the UK.
A DPA is a voluntary agreement through which a prosecutor agrees to suspend a prosecution and, subject to the defendant's compliance with the terms of the DPA, discontinue proceedings once the term of the DPA has expired.
Historically, DPAs are used in corporate offences in the US. The power to use DPAs has been available to UK prosecutors, including the Serious Fraud Office (SFO), since February 2014. It has taken more than 18 months for the first DPA to be approved by a UK Court, but is a strong indication of things to come.
The global picture
Outside the US and UK, there is a growing appetite to pursue large anti-corruption and bribery prosecutions. This, in turn, is leading to multi-jurisdictional investigations and greater cooperation between and among regulators across multiple jurisdictions.
Some, like the Australian Federal Police, have set up liaison officers in other territories; others are collaborating to repatriate corruption suspects to the home jurisdiction, notably China, to face prosecution.