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Over the last year, the Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DOJ) together closed more than 50 enforcement actions under the Foreign Corrupt Practices Act (FCPA) against businesses engaged in commercial activity beyond the borders of the United States. Those investigations netted fines and penalties of nearly $2.5 billion—the most substantial transfer of corporate wealth under the auspices of the FCPA in any year since its inception. Another 17 senior officers and directors were charged individually with federal offenses or faced civil fines, while a host of other employees lost their jobs as a result of their involvement in suspect business transactions abroad. And we now know that the greatest number of enforcement actions across the history of the FCPA program have arisen in connection with business activities in China, surpassing Nigeria, the next most common venue, by a considerable margin.

With news of the resumption of commercial aviation flights to Cuba, and other changes in the Cuba embargo accomplished through Presidential executive order, it would appear at first blush that the time is ripe to travel to Cuba to investigate commercial opportunities there. But appearances can be deceiving, and we wanted to report on the reality of Cuba travel and the opportunities there:

Magnifying glass on docFor years, FCPA observers have predicted that the Department of Justice (“DOJ”) will increase its prosecutions of corporate officers and employees for FCPA violations. These predictions have so far proven disputable, as the number of individual FCPA prosecutions has remained essentially flat and DOJ has struggled to convict individual FCPA defendants. However, high-ranking DOJ and SEC officials have recently stated their commitment to focus more on individual FCPA violators. DOJ has affirmed its focus with last fall’s Deputy Attorney General’s Memorandum on Individual Accountability for Corporate Wrongdoing (the “Yates Memo”).

Compliance pictureIn my recent interview with Daniel Sheehan of GRC Professional Magazine, I discuss the growing trend of the SEC holding compliance officers personally liable for those they supervise, and what actions they can take to protect themselves.

The SEC is increasingly targeting compliance officers who take missteps in their job, holding them liable for not doing their job properly.  There are cases where a compliance officer doesn’t focus as intently on a problem as they should, so in addition to prosecuting the person who did the misdeed, the SEC is also prosecuting the compli­ance officer and holding them liable.

Following the criticism directed at the SEC for failing to notice problems, they started to take a much harder look at compa­nies than they had in the past. They started to take another look at who in the companies were respon­sible for these breaches, and the compliance officers were in that category.  There are more investigations, more actions and higher penalties. As a consequence, the chances of a compliance officer who does not notify of a problem being caught up in a case is high.

What compliance officers must do to protect themselves:

  • When a problem, or potential problem, is identified, get out in front of it.  Investigate problems aggressively and thoroughly.  Ask questions and follow up on those questions.
  • Document every step of the investigation.  The government will look for evidence that the problem has been thoroughly investigated. For the sake of all involved, evidence is absolutely necessary.  It will need to be proven that the matter has been thoroughly and properly investigated.

If you have any questions about compliance issues, please feel free to contact me.

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The International Practice Group of Garvey Schubert Barer is a cross-disciplinary group of attorneys practicing in areas ranging from business transactions, immigration, maritime, government regulatory work, transportation and logistics, and estate planning. The group members include bilingual and multicultural attorneys who are well-versed in handling these subject matters in a cross-border context. The firm’s attorneys have been actively practicing in the international arena since the early 1970s. 
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