In 2021, the number of Foreign Corrupt Practices Act (FCPA) enforcement actions fell to the lowest level in a decade. According to a Stanford University FCPA Clearinghouse report, the U.S. Securities and Exchange Commission (SEC) and Department of Justice (DOJ) filed only 18 FCPA enforcement actions in 2021. This number is well below the ten-year annual average of 36 stocks.
In 2020, the DOJ and SEC filed 39 FCPA enforcement actions. The record for the past ten years was reached in 2016 when agencies filed 58 actions. 2021 also saw a sharp decrease in the number of sanctions imposed by US regulators as part of FCPA enforcement actions. The DOJ and SEC imposed just under $360 million in penalties in 2021, a 94% decrease from 2020 and the third lowest in a decade. $299 million of these sanctions were imposed on Credit Suisse Group AG.
The 18 FCPA actions filed in 2021 were related to nine separate corruption schemes. Two of the systems were located in Brazil while the other seven were each located in a separate foreign country.
Recently opened FCPA investigations also declined in 2021. Only three companies disclosed in their SEC filings a new FCPA-related investigation opened by US authorities. In 2016, thirty companies disclosed new investigations.
The FCPA, passed by Congress in 1977, is a US anti-corruption law that prohibits the payment of anything of value to foreign government officials for the purpose of gaining business advantage. It also contains accounting provisions that require publicly traded companies to establish and maintain books and records that accurately reflect the company’s transactions. In 2010, the Dodd-Frank Act, which established the SEC’s whistleblower program, added whistleblower provisions to the FCPA.
“This remarkable drop in activity may be the initial result of the steady decline in publicly available surveys over the past four years,” the authors of the Stanford report speculated. “If so, the level of activity could remain sluggish over the next few years. That said, policy changes initiated in the first year of the Biden administration could lead to an increase in the number of FCPA-related investigations and enforcement actions in the coming years. In the more immediate future, at least two companies, Stericycle, Inc. and Honeywell International Inc., have disclosed 2021 accruals in anticipation of settling their FCPA investigations.
In an announcement of enforcement results for 2021, the SEC highlights a number of “key priority areas” in which it filed notable enforcement actions during the year. One such area is FCPA enforcement. The announcement describes the four lawsuits filed by the SEC in fiscal year 2021 and also notes that “the SEC’s Whistleblower Program has been critical to these efforts and has had a banner year.”
The Stanford report highlights the Biden administration’s National Security Study Memorandum from June as a major FCPA development in 2021. Following the release of the memorandum, in which the Biden administration signaled that the fight anti-corruption would be a central aspect of its foreign policy, whistleblower advocates have begun to call for the full use of the FCPA’s whistleblower provisions as a key force in the fight against corruption.
For example, in an article published in September, whistleblower attorney Stephen M. Kohn of Kohn, Kohn & Colapinto states that “[t]he issues that President Biden’s anti-corruption memorandum targets with a renewed effort to fight international corruption are remarkably similar to the issues identified by the [SEC] and the [DOJ] to support the pursuit of prosecutions under the [FCPA], including the use of whistleblowers as a key tool to detect foreign bribery.
“Given these similarities, the use of the FCPA should be the backbone of an effective anti-corruption program,” Kohn continues. “Similarly, the use of the Dodd-Frank Act’s transnational whistleblower program needs to be expanded, particularly in light of evidence of the invaluable role whistleblowers play in detecting corruption.”
Stanford FCPA Clearinghouse 2021 Year in Review
Nine ways the Biden administration can use whistleblowing to fight corruption
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