FCPA crackdown to lift cross-border investigations in Asia

24 April 2022 Consultancy.asia 3 min. read

With the Biden administration cracking down on bribery and corruption, the number of cross-border investigations related to FCPA violations is expected to increase in the coming years. Keith Williamson, Head of Alvarez & Marsal’s Disputes & Investigations practice in Asia, explains why and how Asia-based multinationals should be prepared.

In December last year, the Biden administration unveiled the US’s first-ever national security strategy memorandum focused on corruption, designed to support “economic equity, global antipoverty and development efforts, and democracy”.

This new strategy came after a 25 percent increase in whistleblowing reports regarding FCPA violations in 2021.

Keith Williamson, Head of the Disputes & Investigations practice in Asia, Alvarez & Marsal

Launched in 1977, the Foreign Corrupt Practices Act (FCPA) is a federal law that prohibits US citizens and entities from bribing foreign government officials to benefit their business interests. The Act is applicable worldwide, and requires all companies with securities listed in the US to meet certain provisions.

According to Williamson, a Managing Director at Alvarez & Marsal, there is renewed focus in the US administration’s handling of corruption. “President Biden has significantly increased resources to fight corruption and has appointed a record number of FCPA prosecutors. We foresee that the number of cross-border investigations and related sanctions will accelerate in 2022 and reach new peaks in the coming years.”

“All organisations with international operations should expect heightened scrutiny this year and beyond. The most vulnerable industries will continue to be those that are government-regulated, including oil & gas, aerospace and defense, and healthcare,” Williamson continued.

In Asia, the majority of investigations will according to Alvarez & Marsal’s assessment focus on companies with operations in mainland China. Indonesia, Vietnam and Thailand are also expected to see an increased number of investigations.

To prepare and avoid sanctions, Williamson advises businesses to assess the need to strengthen financial internal controls and compliance procedures, provide updated training to staff and review third party relationships and contracts. On top of that, performing regular risk assessments and monitoring to identify where the risks lie and how they might evolve over time is also essential.

Williamson: “The pandemic has hindered multinationals’ compliance procedures, with limited to non-existent travel from US or European headquarters to oversee and test processes and controls in locations cut-off through travel restrictions. Instead, companies have had to rely on local management oversight or remote scrutiny creating gaps in compliance procedures and challenges for ongoing monitoring, internal audits and investigations.”

Meanwhile, Williamson also advises multinationals to consider potential FCPA enforcement considerations during their merger & acquisition processes. “Acquirers are now demanding forensic due diligence from third parties to ensure that the companies they are courting are operating in a lawful and ethical manner.”