Does your jewelry company do business with any foreign third-parties? For many of our members, the answer is yes, thus you should be aware of the Foreign Corrupt Practices Act (“FCPA”). The FCPA was enacted by Congress in 1977 to combat the rampant corruption and bribery of foreign officials by American businesses to gain an unfair advantage over their competitors.[1] The Act includes both accounting transparency requirements and anti-bribery provisions. Any business that has dealings with foreign third parties is expected to have an anti-bribery compliance system in place to ensure that the business is in compliance with the FCPA and also ensure that the business’s foreign third-party contacts are in compliance with the FCPA. Thus, this article will offer you a brief overview of the FCPA and how it may apply to your jewelry business.

Overview

Under the FCPA, any U.S. business or foreign business with sufficient ties to the U.S., big or small, must have a strict anti-bribery compliance program. The FCPA defines a bribe as “anything of value”, not only money.[2] Under the FCPA, it is a crime to pay a bribe, offer to make a bribe, or authorize a payment to make a bribe to government employees, political parties, party officials, political candidates, employees of state owned enterprises, or employees of public international organizations.[3] Additionally, failure to sufficiently vet third-parties who do any of the above can lead to liability through your business dealings with them.

 

The penalties for FCPA violations are staggering, and are per-occurrence.[4] Violations of the Anti-Bribery Provisions can lead to criminal penalties of business fines up to $2 Million, or individual fines up to $100,000 and up to 5 years in prison. Civil penalties for anti-bribery violations include fines of up to $16,000.

How to Comply?

The power to enforce the FCPA is vested in the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (“DOJ”). However, in assessing compliance with the FCPA, the SEC and DOJ do not have specific compliance requirements.[5] Rather, they look at the overall practices of the business and whether the business strives to uphold a high ethical standard. All businesses are expected to have a clear policy advocating compliance, and are expected to complete due diligence in all business dealings.

For small and medium sized businesses, it may be easy to ensure that your employees are not in violation of the FCPA. However, you should protect your business when hiring foreign third-parties. The best ways to do so is to complete due diligence checks on agents, insert standard clauses in contracts, and to set up “red flags” to provide internal controls in accounting[6]. Important contract clauses to include are clauses that require cooperation with any ethics and compliance investigation, and material breach of contract clauses stating that any violation of the FCPA is a material breach of contract. It is also important to flag and audit any expenses with suspicious descriptions, as these expenses may have been used as payment for a bribe.

Check out the SEC’s FCPA Resource Guide here for more information and be sure to coordinate compliance with your attorney and compliance officer. You can also reach out to the JVC with any questions.

[1] https://www.sec.gov/spotlight/fcpa/fcpa-resource-guide.pdf Page 3

[2] http://www.secwhistleblowerprogram.org/whistleblower-fraud/bribes-vs-payments

[3] https://www.sec.gov/spotlight/fcpa/fcpa-resource-guide.pdf Pages 19-21

[4] https://www.sec.gov/spotlight/fcpa/fcpa-resource-guide.pdf Pages 68-71

[5] https://www.sec.gov/spotlight/fcpa/fcpa-resource-guide.pdf Page 57

[6] http://www.americanbar.org/content/dam/aba/events/international_law/2014/04/aba-nysba-international-boot-camp/Ethics2.pptx