Accord to H. Glen Jenkins, a CPA with Warren Averett, LLB, smaller enterprises can be caught up in the anti-bribery legal morass that have vexed large corporations in recent years.
The first time many entrepreneurs have heard about the Foreign Corrupt Practices Act (FCPA) is from headlines in the Wall Street Journal regarding violations and salacious penalties against mega multinational companies like Siemens or General Electric.
Companies of this stature can spend exorbitantly on consultants and millions on outside counsel to investigate potential violations. Meanwhile, small and medium-sized businesses are increasingly doing business overseas but do not have such resources to spend on similar compliance efforts.
FCPA prohibits payments to foreign government officials to assist in obtaining or retaining business. The FCPA contains no de minimisvalue exceptions and is enforced by the SEC and the DOJ against public and privately held companies. Violators of the FCPA provisions are subject to severe civil and criminal penalties including both monetary fines and imprisonment.
Jenkins argues smaller companies subject to the FCPA can still implement and design FCPA compliance programs that are effective and efficient around the precepts of education, assessment and enforcement.
Education: Every company doing business internationally should establish a code of conduct that enumerates the policies, procedures, rules and best practices to dictate how employees are to conduct business and their behavior. Effective oversight needs to be setup and controls designed to detect unethical conduct. The code of conduct should explain the provisions of the FCPA in a manner that is easily understood. Employees should acknowledge receipt and understanding of the code of conduct. However, simply having a code of conduct alone is not sufficient as employees must receive periodic training on the code of conduct and the FCPA.
Assessment: Companies must ensure that employees follow the compliance programs by conducting audits and assessments. The audits must be designed to focus on high risk areas that are specifically problematic (where illegal and unauthorized payments could occur). The mechanisms established to prevent violations must be tested and assessed. The assessment results must be issued to senior management, and deficiencies must be addressed immediately.
Enforcement: No program can be considered effective if it cannot demonstrate adherence to the standards promulgated in the code of conduct. An ethical culture must be cultivated, and individuals failing to adhere to the organizations’ standards must be disciplined. If FCPA violations are suspected, the company must take appropriate investigative action, and steps must be taken to preserve the confidentiality of the investigation.
Jenkins continues: While there are many opportunities for small and medium-sized businesses in emerging markets outside the U.S., companies must be prepared to avail themselves to the scrutiny of not only the FCPA, but also to the anti-bribery statutes of the countries where they conduct business. The aforementioned compliance guidelines provide a frame-work for companies to establish an effective and efficient FCPA program.
H. Glen Jenkins, CPA, CVA, CFE, is Senior Manager in the Fraud & Forensic Services practice in the Atlanta, Georgia offices of Warren Averett. firstname.lastname@example.org.