As a life sciences organization, you may be well aware of the mandates of compliance and regulations in your industry. However, not everything is in black and white; there are shades of gray when it comes to the FCPA (Foreign Corrupt Practices Act). In mid-2020, the Department of Justice (DOJ) issued an updated resource,A Resource Guide to the U.S. Foreign Corrupt Practices Act, Second Edition. While the DOJ FCPA guidance doesn’t offer any new policy declarations, it clarifies some previously ambiguous areas.
In this post, we’ll offer the highlights of the new DOJ FCPA guidance and what changes you need to make to remain compliant and mitigate risk.
As a disclaimer, the DOJ FCPA guidance is not absolute. It has limitations and mostly only pertains to U.S. law and enforcement. The DOJ, of course, only has jurisdiction there. It’s always advisable to confer with your legal counsel on interpretations of the guidance and anything outside its scope.
The 2020 Guidance is an update to the previous publication of 2012. In looking at what matters most to a life sciences company, these changes are the ones you’ll want to review and consider how they should impact your compliance program, accounting controls,third-party due diligence, and other areas relating to the FCPA.
There are new interpretations regarding anti-bribery provisions. First is the Hoskins case. The DOJ alleged Lawrence Hoskins, a U.K. resident, funneled bribes to Indonesian officials that allowed a French company’s U.S. subsidiary to win a contract. Hoskins did not work for the U.S. subsidiary, nor is he a U.S. national
The DOJ charged him anyway, which a district court dismissed. The DOJ appealed, even though the court said it could not expand the scope of the statute. Instead, the DOJ could pursue charges that Hoskins was acting as an agent for the U.S. subsidiary. He was found guilty, but the trial court stated the government did not prove its theory that the U.S. company controlled Hoskins' actions.
The updated guidance relating to this notes that the case does not limit conspiracy or aiding and abetting liability, and the DOJ will continue to pursue like cases. Further, the guidance says the Hoskins case doesn’t apply to accounting provisions.
In Chapter 3 of the guidance, there are updates regarding criminal violations of the accounting provisions.
There is new language regarding the DOJ’s authority to prosecute criminal violations. It also notes a specific statute of limitations period, not previously defined.
It clarifies language on the mens rea requirement for this area. It includes the term “willfully” in the statement regarding criminal liability. It now reads, “criminal liability can be imposed on companies and individuals for knowingly and willfully failing to comply with the FCPA's books and records or internal controls provisions."
This chapter also offers context around books and records violations, and that improper recording can be evidence of corrupt intent.
The DOJ also recognizes that internal auditing controls and compliance programs are two distinct things that have areas of overlap in Chapter 3. The guide goes on to say that internal accounting controls and compliance programs “need to be tailored to the risks specific to its operations.”
The FCPA does not define specific internal financial controls. It only says they should provide “reasonable assurance.” Some legal experts are reading into this that a compliance program may not be a critical focus of a DOJ investigation, but that’s just opinion at this point.
The guidance addresses third parties in Chapters 2 and 5. As you’re aware, third parties are a principal risk under the FCPA. The guidance makes no formal updates on a third party's role but does include some case updates.
In Chapter 5, the DOJ follows up on its list of “hallmarks of effectiveness.” It reiterates that the business should build programs specific to their risk and update it when new risks arise or markets change. The 2020 guidance refines earlier comments.
The “good faith” of the program now requires the program to be “ adequately resourced and empowered to function effectively.” Additionally, it must work “in practice,” and the adequacy of the program is a consideration of the DOJ and SEC (Securities and Exchange Commission) when deciding to act on a possible violation.
The 2020 Guide has a new hallmark on these topics, saying how a company responds to misconduct is the “truest measure of an effective compliance program.” It also discusses expansions of well-functioning and appropriately funded investigations conducted in a timely and thorough manner.
This section also highlights new DOJ and SEC expectations regarding an organization’s obligation to incorporate lessons learned from investigations or violations into their compliance program.
The 2020 Guide incorporates the Filip Factors, which the DOJ considers when charging. Filips Factors was updated in 2015. It also includes the FCPA Corporate Enforcement Policy (CEP) as a guiding document.
Chapter 6 takes on disgorgement stemming from these cases. The Kokesh case ruled that the SEC’s disgorgement remedy is a “penalty” and subject to a five-year statute. The Liu case limits the amount the SEC can seek in disgorgement
Balancing anti-bribery and corruption laws is overwhelming, stressful, and challenging for life sciences. Compliance is a never-ending part of working in the industry, but you can streamline and simplify it with the right technology tools.
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