Foreign Corrupt Practices Act and U.S. Sentencing Guidelines

Combating Corruption
Corporate corruption and unethical behaviors are unfortunately a reality. Left unchecked, this can be a catastrophic risk to companies. The Foreign Corrupt Practices Act of 1977 (FCPA) is a set of U.S. federal laws that has deep impacts for both public and private companies. Specifically, it makes it unlawful to make payments to foreign government officials to obtain or retain business through its anti-bribery provisions. The FCPA also requires companies whose securities are listed in the United States (i.e., public companies) to meet certain accounting provisions designed to operate in tandem with its anti-bribery provisions. This includes; (a) to make and keep books and records that accurately and fairly reflect the transactions of the corporation and (b) to devise and maintain an adequate system of internal accounting controls. Download our flyer here.

Framework

Of course, the FCPA is simply one source of numerous legal rules and regulations directly impacting businesses. There are many others such as the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act of 2010, which are also geared towards encouraging entities to behave ethically. The predominant framework for ethical compliance has been the U.S. Sentencing Guidelines (Guidelines), specifically Chapter 8, Part B, entitled Remedying Harm from Criminal Conduct, and Effective Compliance and Ethics Program from the United States Sentencing Commission. Since 1991, these Guidelines have served as corporate America's blueprint in structuring effective programs to prevent and detect violations of law.

Effective Compliance and Ethics Program Defined
To have an effective Program, the Guidelines specify that an organization must exercise due diligence to prevent and detect criminal conduct. They must also promote an organizational culture that encourages ethical conduct and demonstrate a commitment to compliance with the law. The Guidelines forward the following seven minimum requirements for encouraging ethical conduct and demonstrating a commitment to compliance with the law:

Establish standards and procedures (such as a code of conduct and appropriate policies and procedures) to prevent and detect criminal conduct.
Governing authority (i.e., board) must be knowledgeable about the content and operation of the Program, and exercise reasonable oversight with respect to its implementation and effectiveness. In addition, high-level individual(s) must be assigned overall responsibility for the Program, and specific individual(s) delegated day-to-day operational responsibilities. To carry out these responsibilities, organizations must allocate adequate resources, appropriate authority and allow responsible individuals direct access to the governing authority or subgroup of the governing authority.
Avoid placing in a substantial authority position those whom the organization knew, or should have known through the exercise of due diligence, had engaged in illegal activities or other conduct inconsistent with an effective Program.
Communicate the Program's standards and procedures throughout the organization, including training that is tailored to members of the governing authority, high-level personnel, substantial authority personnel, the organization's employees, and applicable agents of the organization.
Ensure that the Program is followed, evaluate the Program's effectiveness, and publicize a system.
Promote and enforce the Program consistently throughout the organization through appropriate incentives and disciplinary measures.
After criminal conduct has been detected, the organization takes steps to respond appropriately to the criminal conduct and to prevent further similar criminal conduct, including making any necessary modifications to the organization's Program.

The Guidelines also call for organizations to periodically assess the risk of criminal conduct and take appropriate steps to design, implement, or modify requirements of the Program to reduce the risk of criminal conduct identified through the risk process. While the U.S. Sentencing Guidelines appear straightforward there are numerous pitfalls lurking. A single weak link to any of the seven minimum requirements can render a compliance and ethics program ineffective.

Service Offerings

Protect your organization by engaging Candela Solutions. Services include:

Training to create awareness and understand leading practices
Designing an effective Compliance and Ethics Program; including assisting with policies and procedures
Integrating efforts to realize a holistic governance, risk and compliance process
Conducting independent risk assessments
Internal auditing services to test Program effectiveness
Advising on remediation efforts to mitigate risks and address audit findings

Refer to related in-house training sessions:

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Foreign Corrupt Practices Act and U.S. Sentencing Guidelines

Establish standards and procedures (such as a code of conduct and appropriate policies and procedures) to prevent and detect criminal conduct.

Avoid placing in a substantial authority position those whom the organization knew, or should have known through the exercise of due diligence, had engaged in illegal activities or other conduct inconsistent with an effective Program.

Communicate the Program's standards and procedures throughout the organization, including training that is tailored to members of the governing authority, high-level personnel, substantial authority personnel, the organization's employees, and applicable agents of the organization.

Ensure that the Program is followed, evaluate the Program's effectiveness, and publicize a system.

Promote and enforce the Program consistently throughout the organization through appropriate incentives and disciplinary measures.

After criminal conduct has been detected, the organization takes steps to respond appropriately to the criminal conduct and to prevent further similar criminal conduct, including making any necessary modifications to the organization's Program.