Trends in US criminal FCPA enforcement – record numbers being driven by increased resources and cooperation incentives
February 2020 | SPECIAL REPORT: CORPORATE FRAUD & CORRUPTION
Financier Worldwide Magazine
February 2020 Issue
Over the past few years, there have been two dominant trends in US criminal Foreign Corrupt Practices Act (FCPA) enforcement that in combination have driven enforcement results to new heights.
First, starting in 2016, the US Department of Justice (DOJ) doubled the number of prosecutors in its FCPA unit, a long-term investment that is beginning to show real dividends for the DOJ in the form of more enforcement actions and litigation, especially against individuals. Second, the DOJ has increased its collaboration with foreign counterparts, in particular by coordinating multi-million or even multi-billion dollar resolutions, which has both increased the numbers reported by the DOJ and led to additional investigations. These underlying trends show no signs of abating in the future, suggesting that the current high-water mark of enforcement may in fact be a new normal, and that pressure on companies and individuals is likely to remain high for the foreseeable future.
The DOJ’s FCPA unit has progressively increased the number of FCPA-related enforcement actions and the number of individuals it has criminally charged year over year. By every significant measure, 2019 marked the peak of DOJ FCPA enforcement. The DOJ brought more FCPA-related enforcement actions than at any point since 2010 (54) and secured the largest amount of FCPA fines ever ($2.6bn). In addition, the FCPA unit charged more individuals (34) and secured more convictions (30) than in any prior year.
These numbers are substantially higher than just a few years ago. From 2015 to 2019, the number of FCPA-related resolutions jumped from 12 to 54. From 2016 to 2019, the FCPA unit has roughly doubled the number of individuals charged per year – from 17 to 34. As the number of individuals charged has increased markedly, so has the number of FCPA-related trials, with 2019 also having a record number of such trials (4). In many years this last decade, there would be no FCPA-related trials at all during the year.
The dramatic increases in these numbers reflect two key trends. First, these numbers appear to be the product of substantial increases in resources that the DOJ has devoted to FCPA enforcement. In April 2016, the DOJ announced that it would be adding 10 additional prosecutors to the FCPA unit, which served to increase the size of the unit by more than 50 percent. Simultaneously, the FBI established three squads of special agents to support the increase in prosecutors. Currently, the DOJ’s FCPA unit is comprised of approximately 35 attorneys exclusively dedicated to investigating and prosecuting FCPA-related violations. Indeed, less than 10 years ago, there were only a handful of DOJ attorneys dedicated solely to prosecuting FCPA-related offences. The corresponding exponential jump in enforcement results should come as no surprise, and there may yet be more to come. As the prosecutors and agents on-boarded in 2016 become more seasoned, they will likely become even more productive in their work.
The second underlying trend driving FCPA enforcement is that the DOJ begun to use the powerful incentive of multi-million dollar resolutions to entice more foreign authorities into its enforcement orbit. The DOJ has always worked to collaborate with its foreign counterparts, but over the past few years, the government has coordinated not just investigations but resolutions with an ever-expanding list of foreign countries. Indeed, the very idea of coordinated resolutions was the exception to the rule until 2016. Before then, the FCPA unit had been involved in only a few coordinated resolutions, and in many years, none at all. For example, from 2013-2015, the DOJ did not reach any coordinated anti-corruption resolutions with foreign enforcement authorities. By contrast, in each year from 2016-2018, there were close to $1bn in foreign penalties related to such coordinated resolutions. Coordinated resolutions with foreign counterparts during the past few years have included significant resolutions with VimpelCom, Odebrecht/Braskem, Rolls-Royce, Telia Company, Keppel Offshore & Marine, SBM Offshore, Petrobras and Société Générale. Importantly, the list of new enforcement partners includes perennial FCPA-hotbeds like Brazil, France, the Netherlands, Switzerland and Singapore.
The proliferation of cross-border enforcement partnerships has its origins in concerted efforts by the DOJ and in a series of ground-breaking non-FCPA coordinated resolutions. For years, US regulators have carefully cultivated relationships with foreign counterparts. Now, the cross-pollination is in full bloom. As laws like the FCPA and the reality of disappearing borders have brought domestic and foreign law enforcement into ever more frequent contact, the friction points in key areas like information sharing, evidence collection and dissemination, and increased understanding of respective processes have dramatically lessened or disappeared.
The DOJ’s relationship with its counterpart in the UK – the Serious Fraud Office (SFO) – provides a good example of how interwoven the DOJ’s enforcement actions have become with those of foreign authorities. The DOJ recently embedded one of the prosecutors from its FPCA unit with the SFO. For several years, the DOJ and SFO have engaged in joint annual training on cross-border investigations and prosecutions. And in 2014, the UK passed legislation empowering the SFO to engage in deferred prosecution agreements (DPAs) modelled after those of the DOJ’s FCPA unit.
The end result of this level of collaboration is a shared global investigative and enforcement capability that continues to improve in efficacy and efficiency. Additionally, supranational organisations like the Organisation for Economic Co-Operation and Development (OECD) highlight the corruption issues plaguing the developing, and developed, world. These efforts have combined with public outrage over high-profile international cases, like corruption at FIFA, to spur legislatures and other public officials around the world to action. That many of the countries highlighted in this article and others – e.g., the UK, Brazil, France and Mexico – have also enacted substantial legislative reforms to combat corruption within the last five years is not happenstance.
As is so often the case, DOJ policy has now caught up to its existing enforcement priorities. On 9 May 2018, the deputy attorney general announced the insertion of new provisions into Title 1 of the Justice Manual (formerly the United States Attorneys’ Manual). These new provisions specifically direct DOJ prosecutors to “endeavor” to coordinate efforts with “foreign enforcement authorities that are seeking to resolve a case” involving the same misconduct, in an effort to avoid duplicative penalties and discourage “piling on”.
In trying to predict how FCPA enforcement will trend in the future, these twin underlying factors behind the increased enforcement results will play a key role. Unless the DOJ draws down on its resources, or lessens its coordination with foreign enforcement authorities, it seems unlikely that enforcement statistics will decline anytime soon. Indeed, given its recent track record of success, the DOJ may well recognise that further investment in these areas could produce even greater results.
Benjamin D. Singer is a partner and Nia Zaferis is an associate at O’Melveny & Myers. Mr Singer can be contacted on +1 (202) 383 5201 or by email: bsinger@omm.com. Ms Zaferis can be contacted on +1 (213) 430 8155 or by email: ezaferis@omm.com.
© Financier Worldwide
BY
Benjamin D. Singer and Nia Zaferis
O’Melveny & Myers
Q&A: localising a global compliance programme
Self-incrimination protection and procedure in international cases
Use of interviews in international fraud investigations
Anticorruption enforcement gathers momentum in Mexico
The UK Bribery Act – 2019 round-up
Unexplained wealth orders and account freezing orders
The ICO seeks to obtain powers under the Proceeds of Crime Act 2002