Updates to the US FCPA Resource Guide

On July 3, 2020, the US Department of Justice (“DOJ”) and the US Securities and Exchange Commission (“SEC”) released the second edition of the Resource Guide to the U.S. Foreign Corrupt Practices Act (“FCPA”) updating the prior edition published in November 2012 (the “Updated FCPA Guide”). The Updated FCPA Guide, which still maintains its non-binding nature, introduces up-to-date information that enhances the prior version of the guide and ensures it remains relevant to this day to help companies, practitioners and the public to prevent corruption.

The main issues addressed by the Updated FCPA Guide are the following:

 

• Clarifications on the definition of “foreign official”. While the 2012 guide had references to the meaning of “foreign official”, which includes “officers or employees of a department, agency, or instrumentality of a foreign government”, the Updated FCPA Guide introduces additional clarifications to the meaning of “instrumentality”. In fact, the 2020 version recognizes the broad scope of term “instrumentality”, which can include state-owned and state-controlled entities, and points out the assessment made by the Eleventh Circuit in its 2014 decision in United States v. Esquenazi.

 

In addition, the Updated FCPA Guide particularly states that the definition of “foreign official” includes officials of public international organizations and expressly remarks that the “DOJ has brought charges against persons who pay bribes to such employees and representatives of such “public international organizations”.

 

• Additional comments regarding M&A transactions and successor liability. The Updated FCPA Guide states that the DOJ and the SEC acknowledge that entities/individuals may not be able to conduct robust pre-closing due diligence in certain occasions. Thus, as per the guide’s wording, in such scenarios, both enforcement agencies will consider post-closing due diligence and integration efforts when determining successor liability. This is because they recognize the benefits of M&A transactions “particularly when the acquiring entity has a robust compliance program in place and implements that program as quickly as practicable at the merged or acquired entity”. To illustrate such position, references to some recent cases were added to the guide. Similar considerations were introduced in the recently updated edition of the DOJ Guidance on Evaluation of Corporate Compliance Programs that we commented on in our article available at: US DOJ Updated Guidance on Evaluation of Corporate Compliance Programs.

 

• Limitations of liability under conspiracy and aiding and abetting theories. The Updated FCPA Guide addresses the reasoning of the Second Circuit in United Stated v. Hoskins where the district court rejected the government’s interpretation to expand the extraterritorial reach of the anti-bribery provisions of the FCPA. In particular, the Updated FCPA Guide states that “[…] at least in the Second Circuit, an individual can be criminally prosecuted for conspiracy to violate the FCPA anti-bribery provisions or aiding and abetting an FCPA anti-bribery violation only if that individual’s conduct and role fall into one of the specifically enumerated categories expressly listed in the FCPA’s anti-bribery provisions”. Nevertheless, the Updated FCPA Guide underlines that the Hoskins decision is not settled since at least one district court from another circuit has rejected it. Furthermore, the Updated FCPA Guide expressly states that the accounting provisions are not subject to the reasoning of the Second Circuit in the Hoskins case and such limitation should not apply.

 

• Updates on the applicable statute of limitations. In this new FCPA Guide, the applicable statute of limitations no longer amounts to five years for both violations of the anti-bribery and accounting provisions. While the statute of limitations for violating the anti-bribery provisions remains the same (five year-term), the statute of limitations for violating the accounting provisions now amounts to a six year-term since such violations fall within the securities fraud offenses.

 

• Changes when addressing internal controls. The Updated FCPA Guide now refers mainly to internal “accounting” controls rather than internal controls. Moreover, in this updated guide, the DOJ and the SEC acknowledge that there is a difference between a company’s internal accounting controls and its compliance program though certain components may overlap. In addition, the enforcement agencies strengthen the importance of tailor-made internal accounting controls and compliance programs.

 

• Further adjustments to clear up mens rea requirement of FCPA accounting provisions. The 2012 was unclear over the “willful” requirement for criminal liability in case of violations of FCPA accounting provisions. The updated guide expressly states that companies and individuals may be liable for violating the FCPA anti-bribery and/or accounting provisions if they act both knowingly and willfully.

 

• Emphasis on novel case law, investigations, policies and effective compliance programs. The Updated FCPA Guide includes references to some new case law and investigations as well as policies that have been released in the last eight years. The guide particularly addresses the FCPA Corporate Enforcement Policy, the Selection of Monitors in Criminal Division Matters, the Coordination of Corporate Resolution Penalties (also known as Anti-Pilling On Policy) and the Guidance on Evaluation of Corporate Compliance Programs. Throughout the document the DOJ and the SEC clearly stress the relevance of implementing an effective compliance program, specially to respond to misconduct.

 

Additional developments include topics such as disgorgement and the local law defense.

Certain issues included in the Updated FCPA Guide are also introduced in Argentine Anti-corruption Law 27,401 and its complementary regulation, such as the broad definition of foreign public official, the relevance of due diligence in M&A transactions and the relevance of having an effective compliance program in place.

All in all, the Updated FCPA Guide will definitely be a valuable tool for the compliance community as well as for companies when developing and evaluating their compliance with the FCPA.