A major consideration for American Companies doing business abroad is the Foreign Corrupt Practices Act of 1977. This far-reaching piece of legislation is both largely misunderstood and incredibly broad in scope. The classic images of briefcases full of cash slipped under the table or millions siphoned into private bank accounts are part of it, but the Act can extend towards much more innocent activities. The Department of Justice can bring proceedings against a company for the conduct of a “stockholder acting on behalf of a firm” (say, an agent, or a local sales representative).
Many companies have tried to explain away their actions as the cost of doing business, but the Department of Justice tends to disagree. Fines can be quite extensive; as a recent Reuters article details, Siemens was forced to pay $450 million in 2008 for improper payments related to contracts in South America and Bangladesh and Wal-Mart is potentially on the hook for up to $4.5 billion for alleged bribes in Mexico.
So, while you may think your company is squeaky clean, it may be prudent for your Senior Leadership to take a more thorough look at your organization’s oversees operations and risk control practices that are in place. Such measures would address implementing accounting safeguards, proper reporting procedures as well as employee training, as well as providing advice on purchasing proper insurance coverage to protect your firm in case of an incident. All of these measures can provide a firm’s management with transparency as well as reduce an organization’s Total Cost of Risk (TCoR).
If you would like more information on the risk mitigation measures that can help your company do business in new markets, contact our Managing Principal Albert Sica at 732.395.4251 or [email protected].
