Although the Foreign Corrupt Practices Act (FCPA) has been in effect for 35 years as of Dec. 19, many companies still have a long way to go in complying with it. Indeed, 44.6% of professionals saying their either that their companies are not making improvements to prevent and detect corrupt activity or that they don’t know if their company is doing so, according to a survey by Deloitte.
The 55.4% that do have plans to improve their corruption programs are “in line with the government’s expectations,” says Bill Pollard, a partner in the FCPA consulting practice of Deloitte Financial Advisory Services LLP.
The number of companies making improvements, however, is steadily increasing, he adds, “because the government’s vigilance in enforcing the FCPA is driving behavior.” But the number is still not where it needs to be, given the fact that “almost half of the companies that were part of our survey were not planning, or didn’t know if they were planning to make any changes,” Pollard observes.
More than 2,100 professionals from industries including financial services, consumer products, industrial products, technology, media, and telecommunications responded to polling questions during a Deloitte webcast, “The Foreign Corrupt Practices Act: 35 Years of Focusing on Anti-corruption.”
Pollard says that to be in compliance and avoid steep fines, companies need to be “in the mode of continuous improvement,” as risks will always exist for potential corrupt behavior. Companies need to continuously monitor the effectiveness of their program and make improvements where necessary, he says.
In a 130-page document, “FCPA: A Resource Guide to the U.S. Foreign Corrupt Practices Act,” the FCPA recently outlined many examples of fraud, bribery, and corruption–all of which, it says, can be more easily identified using technology that red-flags suspicious expenses and payments.
Assessment of risk is fundamental to developing a strong compliance program, and is a factor evaluated by the Department of Justice and the Securities and Exchange Commission when assessing a company’s compliance program, according to the resource guide.
One-size-fits-all compliance programs are generally “ill-conceived and ineffective because resources inevitably are spread too thin, with too much focus on low-risk markets and transactions to the detriment of high-risk areas,” the guide says.
FCPA compliancce in an organization is generally driven by either the general counsel’s office or the chief compliance officer’s office, with significant input from the CFO, the head of internal audit, the audit committee of public companies, and others within senior management, Pollard says.
The key to managing corruption risk is that that it doesn’t affect every individual in an organization, he adds. Pollard points out that only a subset “who actually have the potential to interact with government officials or to record transactions associated with governments and government officials,” is involved.
According to Deloitte, only 6% of professionals say their companies make effective use of technology in ways recommended by the U.S. Department of Justice and the Securities and Exchange Commission – such as data visualization and analytics – for anti-corruption purposes. In fact, about 36% do not use analytics at all as part of their anti-corruption programs.
The use of technology specifically around data analytics is something companies are starting to slowly adopt to aid in FCPA compliance. But the use of such technology will be “be significantly more important in the future, to demonstrate to the government that you have an effective compliance program,” Pollard says.
The ability to analyze large volumes of data “helps to look at potential areas of risk and identify red flags and allows a company to take big information and focus on subsets,” he explains.
According to the guide, among the way bribes have been misrepresented are:
• Commissions or royalties.
• Consulting fees.
• Sales and marketing expenses.
• Scientific incentives or studies.
• Travel and entertainment expenses.
• Rebates or discounts.
• After-sales service fees.
• Miscellaneous expenses.
• Petty Cash withdrawals.
• Free goods.
• Intercompany accounts.
• Supplier / vendor payments.
• “Customs intervention” payments.