2020 enforcement statistics, and what lies ahead for 2021
U.S. enforcers brought 32 Foreign Corrupt Practices Act (FCPA) actions in 2020, and imposed US$5.69 billion in sanctions in resolved matters. Although newly initiated enforcement actions under the Trump administration remained consistent with historical averages, with six of the 10 largest FCPA settlements in history resolved during his tenure, the number of new FCPA-related investigations disclosed by public companies dropped precipitously during Trump’s four years.
According to data collected by Stanford Law School’s FCPA Clearinghouse, only six new Department of Justice (DOJ) and/or Securities and Exchange Commission (SEC) FCPA-related investigations were disclosed by public companies in 2020, with eight in 2019, 17 in 2018, and 21 in 2017. In contrast, 29 such investigations were disclosed in 2016 – the final year of the Obama administration. This decrease is likely to result in fewer FCPA charges in the coming years, despite the upcoming change in leadership at DOJ and the SEC.
Although the number of newly charged cases may decrease, we expect the trends we saw in cross-border collaboration in 2020 to continue. Last year, U.S. enforcement agencies cooperated with global enforcers in Brazil, El Salvador, France, Guatemala, Guernsey, Italy, Luxemburg, Malaysia, Panama, Singapore, Switzerland, and the United Kingdom to resolve FCPA investigations. Corporations that resolved FCPA investigations in 2020 were participants in numerous industry sectors, most frequently operating within energy, life sciences, consumer goods, or financial services. In addition, the number of individual prosecutions under the FCPA has markedly increased over the past five years. We expect these trends to continue in 2021.
FCPA enforcement policies continue to evolve
DOJ and the SEC released a second edition of their FCPA Resource Guide in July 2020. Much of the guide remains unchanged, but it has been updated to reflect developments in case law and recently revised DOJ policies.
Among other things, the guide:
- makes notable changes that reflect the Second Circuit’s 2018 United States v. Hoskins decision, which shaped the law relating to anti-bribery jurisdiction over non-U.S. nationals based on conspiracy or accomplice liability;
- incorporates DOJ’s guidance on “Evaluation of Corporate Compliance Programs”, which was updated in 2020;
- includes the guidance that was issued through a 2018 memorandum from the then Assistant Attorney General Brian Benczkowski, which identifies factors prosecutors should consider in deciding whether to require a compliance monitor; and
- features updated guidance relating to FCPA compliance in the context of mergers and acquisitions.
The revised guide also incorporates DOJ’s 2018 Policy on Coordination of Corporate Resolution Penalties, which has been incorporated into section 1-12.100 of the Justice Manual, and is often referred to as the “anti-piling-on policy.” The policy seeks to minimize the imposition of duplicative penalties from multiple enforcement agencies and jurisdictions for the same conduct. The updated guide explicitly references factors prosecutors should consider in deciding whether, and how much, to take fines and penalties paid to other enforcement agencies into account. These include: (1) the egregiousness of a company’s misconduct; (2) statutory mandates regarding penalties, fines and/or forfeitures; (3) the risk of unwarranted delay in achieving a final resolution; and (4) the adequacy and timeliness of a company’s disclosures, and its cooperation with DOJ, separate from any such disclosures and cooperation with other relevant enforcement authorities.
Navigating the anti-piling-on policy
DOJ’s recent resolution of the Beam Suntory FCPA investigation raises some interesting questions related to the anti-piling-on policy, and how DOJ and the SEC may view cooperation differently. In October 2020, Beam Suntory, a global producer and distributor of distilled beverages, entered a deferred prosecution agreement (DPA) and agreed to pay US$19.5 million to resolve allegations that it engaged in a conspiracy to violate the anti-bribery, internal controls, and books and records provisions of the FCPA. This settlement followed a 2018 SEC settlement related to the same conduct.
The DOJ settlement awarded only partial cooperation credit to Beam Suntory, and declined to credit the company for making a voluntary disclosure to the SEC, despite the fact that the SEC had previously awarded the company full cooperation credit and credit for self-disclosure. As a result of what DOJ viewed as partial cooperation, Beam Suntory received only a 10 percent discount from the bottom of the U.S. Sentencing Guidelines. Perhaps more significantly, DOJ did not credit the SEC penalty in the criminal settlement because Beam “did not seek to coordinate a parallel resolution” with DOJ.
This decision calls into question the extent of DOJ’s commitment to work with other enforcement agencies to avoid “piling on.” The Policy on Coordination of Corporate Resolution Penalties indicates that: “The Department should also endeavor, as appropriate, to coordinate with and consider the amount of fines, penalties, and/or forfeiture paid to other federal, state, local, or foreign enforcement authorities that are seeking to resolve a case with a company for the same misconduct” (emphasis added). Although this policy also makes clear that DOJ can consider numerous factors when deciding whether to credit fines and penalties paid to other enforcement agencies, DOJ’s apparent belief that Beam Suntory was obligated to facilitate a coordinated settlement between DOJ and the SEC adds clarity to a company’s role in settling these actions to get full credit. A DOJ spokesperson said in response to criticisms of the decision not to credit Beam Suntory for the SEC settlement: “The Department considers a number of factors when deciding whether to credit a penalty paid to another law enforcement agency, including the level of the company’s cooperation and whether the company agreed to, and helped to facilitate, a coordinated resolution, or instead attempted to resolve cases separately and independently. In this case, based on these and other factors, the Department decided crediting was not justified.” See Adam Dobrik, Beam Suntory Case Highlights Piling-on Tension.
Through the Beam Suntory case, DOJ appears to be emphasizing that companies seeking full cooperation credit should accept responsibility quickly, and that if they seek to resolve matters with other enforcement agencies, they should ensure they are coordinating and being consistent with all the agencies.
2020 brought mixed fortunes for the Serious Fraud Office (SFO), which secured three separate DPAs, including an eye-catching €991 million agreement finalized in January relating to bribery in the aerospace sector. That particular DPA formed part of a €3.6 billion global resolution, with much of the work being done long before the COVID-19 pandemic. The global resolution brought together UK, U.S. and French enforcement agencies, reflecting extensive cooperation between these jurisdictions. This is something we are sure to see more of in the future.
An ongoing slump in new investigations, and the impact of COVID-19
In reality, 2020 has been a quiet year in terms of SFO investigations, with only seven new criminal probes opened by the start of December 2020. That being said, 2019 saw just five. More notable perhaps is the fact that the agency closed 14 investigations, bringing the number of active cases below figures for 2018 and 2019.
The smaller caseload is likely to be attributable in part to the impact of COVID-19. Indeed, it was reported that the SFO’s operations were initially significantly impacted by the UK government’s measures to combat the spread of the virus: for an entire month between March and April 2020, when national “lockdown” measures were first implemented, the agency did not conduct any compelled or suspect interviews, nor did it apply for a single search warrant.
It remains to be seen whether the number of investigations will increase through 2021 as compliance breaches that may have slipped through the gaps of 2020 emerge. Director of the SFO Lisa Osofsky made clear in a speech delivered remotely in September 2020 that the agency is “ready and keen” to investigate criminal activity relating to the COVID-19 pandemic, stating “clearly the pandemic has created opportunities for criminals.”
Brexit deal leaves SFO’s international status and future UK–EU enforcement cooperation uncertain
A Brexit deal reached on 24 December 2020 came into force on 1 January 2021. The deal has important implications for enforcement agencies across Europe, and in particular for the SFO.
Exactly how the deal is going to affect the United Kingdom as an international financial services hub remains an open question, though it is clear that the deal was not as far-reaching in terms of access to EU markets for UK financial services as UK negotiators had initially hoped for. The extent to which the United Kingdom’s status as a global financial center is diminished (if at all) is likely to be reflected in the SFO’s status as a leading international enforcement agency.
This is likely to be compounded by the loss of access to the EU’s enforcement toolkit. Although agencies on both sides of the negotiations have consistently signaled their intentions to continue to support one another in investigating and prosecuting economic crime, cooperation is likely to be hampered by the United Kingdom’s loss of access to the EU’s enforcement agencies Europol and Eurojust, the EU’s enforcement databases, the European Investigation Orders framework, and the European Arrest Warrants system.
That said, the Brexit deal does provide for cooperation in some important areas. The deal ensures the continued sharing of DNA and fingerprint data, as well as the continued transfer of airline passenger name records. Crucially, the deal expressly provides for UK and EU agencies to continue to set up Joint Investigation Teams. It was a Joint Investigation Team that brought together UK, U.S. and French agencies to secure the €3.6 billion global resolution referred to above.
Looking ahead, it could be that continued enforcement cooperation during 2021 will lead to future arrangements for more seamless coordination of investigations between the United Kingdom and EU member states. On the other hand, if new obstacles prove particularly onerous, UK and EU investigations may become increasingly detached, which would likely serve to depreciate the SFO’s reputation as a flagship global enforcement agency.
SFO guidance on DPAs and evaluating compliance programs
Early in 2020, the SFO released new internal guidance as part of its Operational Handbook, addressing how the SFO will evaluate the effectiveness of compliance programs. This guidance emphasizes that a compliance program should be effective and not simply a “paper exercise.” It further indicates that the SFO may evaluate compliance programs at several points during an investigation, and underscores how important it is for corporations to document their compliance efforts.
The SFO also issued updated DPA guidance in October 2020, which offers some additional clarity, but does not appear to depart significantly from the SFO’s current practices. Rather, the updated guidance confirms that a DPA is available to companies that admit to misconduct, pay a financial penalty, and agree to specific conditions set out by the prosecutor to ensure future cooperation and compliance. The updated DPA guidance also confirms the SFO will consider whether a DPA is in the public interest, and identifies a non-exhaustive list of factors that weigh against prosecution. These include: (1) cooperation; (2) a lack of history of similar conduct; (3) the existence of a proactive compliance program, both at the time of the offending conduct and at the time of reporting; (4) disciplinary action taken against all the culpable individuals; and (5) whether a conviction is likely to have collateral effects on the public, the company’s employees and shareholders, or the company and/or institutional pension holders. Recent DPA cases make it clear that cooperation remains the key consideration, and we therefore expect the SFO’s increasing use of DPAs to continue – particularly with companies that offer broad cooperation.
Enforcement agencies examining new areas of compliance risk after COVID-19 slowdown
Across Continental Europe, 2020 saw enforcement agencies significantly impacted by the COVID-19 pandemic. Personnel and resources have been stretched, restrictions on movement have hampered investigations, and a slowdown in court activity in some jurisdictions has limited the progress of prosecutions. However, agencies and courts alike have now become accustomed to new ways of working, and enforcement activity is once again picking up pace.
In 2021, we expect to see enforcement agencies devoting energy to ongoing investigations that were affected by the pandemic. We also expect them to turn their attention to a new area of bribery and corruption risk arising out of the global health crisis. The practical impact of the pandemic on business practices around the world, transforming the way many businesses operate and straining resources devoted to compliance supervision, has created an environment across Europe ripe for bribery and corruption. The economic repercussions, meanwhile, have seen European governments implementing a range of major fiscal stimulus measures, not least thanks to the suspension of EU state aid and fiscal rules. Accompanying these measures has been a torrent of rules and regulations, which many companies have struggled to keep up with.
In the coming year, we can expect enforcement agencies across the continent to take a close look at businesses that have taken advantage of government support, examining the ways government contributions have been obtained and used. Companies will do well to look back at their activities during the pandemic – in particular auditing compliance procedures to ensure they have held up to the stresses of the health crisis.
EU Whistleblower Directive deadline looms
In late 2019, the EU’s new Whistleblower Directive came into force – it must be transposed into national law across the EU’s member states by December 2021. The Whistleblower Directive sets out protections for individuals in both the public and private sectors seeking to expose breaches of EU law within their organizations (though notably the EU is encouraging member states to extend protections to breaches of national law as well).
The protections apply to a broad range of individuals who might constitute whistleblowers, and place obligations on legal entities to adopt safe and confidential reporting channels and ensure diligent follow-ups on any reports of wrongdoing. Entities will also have to provide easily understandable and widely accessible information on their internal procedures, as well as on procedures to report externally to relevant competent authorities.
The requirements will apply to both public and private entities with 50 or more employees, though only entities with 250 or more employees will need to comply from December 2021. Depending on national implementing laws, entities with 50–249 employees may have until December 2023 to ensure compliance. With the December 2021 deadline looming, many EU member states have already started processes to implement the Whistleblower Directive into national law. Companies should take note when national legislation comes into force in jurisdictions where they operate, and should ensure that compliance policies are adapted where necessary.
French Anti-Corruption Agency guidance released
The French Anti-Corruption Agency (Agence Française Anticorruption – AFA) recently published practical guidance on the subject of gifts and hospitality. The guidance was developed after public consultation, and is designed to assist companies in developing and implementing an effective gifts and hospitality policy, to prevent corruption. Among other things, the AFA recommends that these policies: (1) be public, so that suppliers and third parties understand the company’s commitment to preventing corrupt practices; (2) include concrete examples relevant to particular industries; and (3) outline substantive criteria (i.e., the purpose of, value of, and frequency of the gift or hospitality) and procedural criteria (i.e., that gifts or hospitality over a certain value require a manager’s approval) that will be applied to determine whether a gift or hospitality invitation is a permissible business courtesy or an attempt at bribery.
We anticipate that the AFA’s recently published gifts and hospitality guidance will lead to new investigations, as not all companies will adapt. How quickly the French authorities will act remains to be seen, but there will surely be new enforcement actions that stem from the guidance.
Developments in Switzerland
Switzerland has also recently been one of the more active jurisdictions for foreign bribery enforcement. In February 2020, Swiss prosecutors secured what was reported to be their first conviction related to operation “Car Wash”, when a Swiss court convicted Bernardo Schiller Freiburghas, a Swiss-Brazilian dual national, on bribery and money laundering charges related to US$35 million in payments made to employees of Brazil’s national oil company, Petrobras.
Swiss prosecutors also charged former Fédération Internationale de Football Association (FIFA) Secretary General Jerome Valcke and two others in connection with an alleged scheme to bribe Valcke to secure broadcast rights to World Cup games. However, Valcke was convicted only on a falsifying documents charge relating to his reporting of three payments he received from a Greek businessman as loans, and was acquitted of the more serious bribery charges. The two men charged with paying bribes to Valcke were also acquitted, dealing a significant blow to Swiss prosecutors.
Against this backdrop of increasing Swiss enforcement, a new Swiss law that will come into force in January 2022 will make foreign fines tax deductible in “exceptional circumstances.” This will be the case when fines are deemed to “violate Swiss public policy or if a company credibly demonstrates that it has taken all reasonable steps to comply with the law.” While this new law may diminish the punitive impact on Swiss companies of foreign fines for bribery and corruption offenses, commentators have suggested it will only rarely be applied once it comes into force next year.
See our separate discussion of developments in Germany and Spain here.
Corruption continues to pose a major challenge in sub-Saharan Africa. It was the lowest-scoring region on Transparency International’s CPI, with a regional average score of 32. Although there are many forms of corruption in the region, “state capture,” defined by Transparency International as “a situation where powerful individuals, institutions, companies or groups within or outside a country use corruption to shape a nation’s policies, legal environment and economy to benefit their own private interests” has recently grabbed the headlines. Most prominently, Isabel dos Santos, the daughter of the former Angolan president José Eduardo dos Santos, and reportedly Africa’s richest woman, faces embezzlement, money laundering, and other charges related to her role as chairwoman of Sonangol, Angola’s national oil company. In January 2020, the Angola attorney general reportedly requested assistance from Portugal in prosecuting the case. The extent of that assistance remains unclear, but in March 2020, a Portuguese court ordered seizure of dos Santos’s assets.
In South Africa, amended regulations now allow information-sharing that may help prosecutors build corruption cases more quickly and efficiently. The new regulations allow information gained through a judicial inquiry into public corruption to be used by the National Prosecuting Authority (NPA), which has historically been required to rely only on publicly available witness testimony, as well as the inquiry’s final report, to guide its own investigations.
For a long time, we have expected African national enforcement agencies and legislators to become more active in looking at historic bribery and grand corruption – particularly as against foreign investors. Despite the above examples, this has not yet materialized as a trend, although no doubt COVID-19 has slowed activity down – and, unlike in Europe and North America, the true impact of the pandemic in Africa is somewhat obscured.
Throughout the Asia-Pacific region, governments are increasingly turning their attention to implementing stronger anti-bribery and corruption regimes. However, we are yet to see intentions materializing into widespread enforcement action. Transparency International’s annual report for 2020 examining the enforcement of the OECD Anti-Bribery Convention generally assessed countries in the region as having very limited levels of anti-bribery and corruption enforcement. Of the Asia-Pacific countries included in the assessment, only Australia was listed as having “moderate” levels of enforcement, while New Zealand achieved an assessment of “limited enforcement.” Each of China, Japan, South Korea, Hong Kong, India, and Singapore were listed as having “little or no enforcement.”
Considering the fallout of the COVID-19 pandemic, enforcement agencies in the region are likely to have their hands full throughout 2021. Whether they will be able to rise to the challenge remains to be seen, but considering progress through the past year, it seems likely enforcement in this region will continue to be dominated by actions from U.S. and European agencies.
See our separate discussion of developments in China and South East Asia.
And see our discussion about developments in Latin America here.
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