7 Lessons from FCPA Guide for Ukraine

Speaking with specialists in compliance field and managers of Ukrainian branches I realized that many of us do not read essential readings and rely only on internal company’s policies, procedures, frameworks, trainings and guidance. Indeed it is wise and important to build global consistency in application of compliance programs, however essential readings are important for professional grows and creative solutions. Let us not forget that one of 10 Hallmarks of effective compliance is “continuous improvement”.

For those who wants to go beyond internal policies and procedures I would like to propose a very core and comprehensive reading for FCPA compliance – A Resource Guide to the U.S. Foreign Corrupt Practices Act by U.S. Department of Justice and U.S. Securities and Exchange Commission. You can download it here (FCPA Guide) (link).

As a matter of foreword FCPA Guide says:  “… It endeavors to provide helpful information to enterprises of all shapes and sizes – from small businesses doing their first transactions abroad to multi-national corporations with subsidiaries around the world. The Guide addresses a wide variety of topics, including who and what is covered by the FCPA’s anti-bribery and accounting provisions; definition of a “foreign official”; what constitute proper and improper gifts, travel and entertainment expenses; the nature of facilitating payments; how successor liability applies in the mergers and acquisitions context; the hallmarks of an effective corporate compliance program; and the different types of civil and criminal resolutions available in the FCPA context. … providing insights into DOJ and SEC enforcement practices through hypotheticals, examples of enforcement actions and anonymized declinations, and summaries of applicable case law and DOJ opinion releases.

I can praise this document for hours, in particular, for quality, business orientation, clarity of thought and structure, scope coverage and numerous examples. But in this post I will do something else. I will share with you the 7 lessons from this document that I summarized for myself. Hopefully, these will be helpful for those who conduct international business in Ukraine as well as for legal and compliance specialists.

7 Lessons from FCPA guide for Ukraine

1. Your cannot outsource corruption

In mitigation of FCPA risk, Ukrainian managers should not rely on outsourcing (passing the job to a third party) as a relief. As mentioned in FCPA Guide “… an executive who authorizes others to pay “whoever you need to” in a foreign government … has violated the FCPA”.  

2. Discussing of risks is already risky

Offer, promise or authorization if made corruptly even if no payment ever happened is sufficient for liability. As Marshal Goldsmith, a famous corporate coach, says: “the higher you go on a corporate ladder the more your suggestions become orders”. So, a lesson for managers, your subordinates may misinterpret and blame you for your suggestion, especially when you tell a poor performer to get the things done.

3. FCPA does not prohibit gifts but prohibits bribes disguised as gifts

The four objective criteria for legitimacy of gifts mentioned in FCPA Guide are: (1) transparency, (2) correct recording in books and records, (3) reflection of esteem or gratitude and (4) legitimacy under local law. At the same time I would recommend to keep an eye on price and frequency of gifts giving. These two aspects may requalify your gifts into bribes.

4. Avoid vaguely described services

This is a particular advice for Ukrainian lawyers. Please do not think that vague contracts are helpful solutions for hiding wrong conduct. If you are afraid to put the realities of the deal on paper then it is better to advise your clients to perhaps revise their risk appetite since no sham agreement shall help in the long run.  

5. Avoid unreasonable discounts to distributors, commissions to agents and fees to consultants

Although red flags become clearly visible when discounts, fees or commissions exceed the market level, there are other manipulations which are clearly visible. An example could be when you consume a poor service but you still pay at the best market level. Please do not pay to timber production companies for marketing services.) These are sham agreements.

6. Do not rely on statutory limitation period and other technical factors

Although five year general statutory limitation period applies both anticorruption and accounting provisions of FCPA, do not rely on it. There are a number of ways for extension and other procedural tricks. So, it is not worth it to take into account, rather to deem it as indefinite.

7. Compliance programs do help significantly

If enforced in accordance with 10 hallmarks, effective compliance programs may not only reduce FCPA liability among other factors but also exempt the company from liability in case of failure to prevent a single violation. “DOJ and SEC may decline to pursue charges against a company based on the company’s effective compliance program… even when that program did not prevent the particular underlying FCPA violation that gave rise to the investigation.

Please follow the link to read this post in Ukrainian.