The Department of Justice has taken over the application of the FCPA with a bang. The new enforcement approach has been unveiled and the message for CCOs and business leaders is clear: anti-corruption compliance should be a top compliance priority. Companies that fail to do so will be severely punished.
The DOJ’s new approach is one of the most significant events that have raised the importance of corporate compliance in the past three decades. However, the DOJ’s new certification requirements are bound to be controversial as they hit a CCO’s most significant risk – personal liability. CCOs must take the DOJ at its word – the certification requirement is intended to hold CCOs accountable in the corporate governance landscape. It will be interesting to watch.
Although the certification language includes an acknowledgment that the certification statement is “material” and satisfies the obstruction of justice law under 18 USC § 1519, the likelihood of a lawsuit against a CCO will be rare. (if at all) unless there is a blatant and intentional fake. representation. But relying on prosecutors to exercise appropriate prosecutorial discretion brings little comfort to CCOs who will now suffer from heightened anxiety.
CCOs will need to undertake their own due diligence process when reviewing a company’s global compliance program to confirm the accuracy of any certification. To the extent that CCOs rely on reports prepared by third-party consultants and advisors (or even the independent compliance monitor) that help companies improve compliance programs, CCOs are likely to conduct their own scrutiny. of the company’s compliance program.
In addition to this overriding and important issue, Glencore’s enforcement action contains several important lessons learned and issues for further consideration.
Correction and compliance improvement factors: The DOJ cited several interesting factors when crediting Glencore’s remediation, including: (a) the centralization of its compliance program; (b) the adoption of third-party payment controls and post-engagement follow-up controls; and (c) invest in increasing the compliance and data analytics workforce. The DOJ has now credited a “centralized” compliance program indicating that it considers a regional or local (country by country) compliance program that is not centrally managed and administered. This is a welcome and logical development for most (if not all) global businesses.
Lack of culture of ethics and compliance: Glencore’s multi-year run has unfolded in a corporate atmosphere where many (if not nearly all) players have enacted flagrant violations of anti-corruption, commodity trading and related laws and regulations . Glencore’s senior management supported this conduct for one reason: increased profits. Glencore has now suffered significant legal and reputational consequences. Glencore faces a difficult road.
Third and more than third: Glencore’s corruption schemes in seven separate countries were carried out using third parties. In West Africa, Glencore relied on two important third parties who regularly engaged in bribes. Notwithstanding its use of third parties to pay bribes, the settlement contains no reference to post-integration monitoring or auditing of existing third parties. Also, it is not certain that Glencore had an appropriate onboarding procedure for new third parties.
The DOJ has long required companies to engage in a robust onboarding, monitoring, testing, and auditing program to manage third-party risk. Glencore, however, appeared to have little to no third-party risk management program.
Illegal business schemes and identity theft: Glencore’s non-existent culture of ethics and compliance has permeated its business activities related to physical and derivative trading. These illegal trading schemes were built around the manipulation of applicable referrals by submitting false bids for specific goods and selectively reporting transactions to the referral service. It was not a one-time event. Instead, as stated in the factual statement, Glencore employees submitted a significant number of false bids during a pricing window under a contract. This commitment of time and energy reflected the willingness of traders and employees to flout basic laws and regulations in order to increase profits.