US authorities are increasing their focus on pursuing cases against financial institutions suspected of breaching the Foreign Corrupt Practices Act (FCPA).
The FCPA bans US entities from bribing foreign public officials for contracts or other business. US authorities’ resolve to enforcing the FCPA is evident as nearly every major bank is facing an FCPA investigation.
“The Federal Bureau of Investigations (FBI) is working very closely with the Department of Justice on enforcing the FCPA. We are increasingly focusing on hedge funds and private equity managers operating in high-risk countries where bribery is a problem. We are working very closely with foreign regulators and authorities on FCPA enforcement,” said Dave Chaves, senior special agent, securities fraud program manager for the New York Divisions at the FBI, speaking at the GAIM Ops Conference in Dublin.
It is believed that fund managers appear to be behind the curve in FCPA compliance compared to corporates. “I believe a lot of corporates received the FCPA memo sooner than fund managers. Corporates recognize that they cannot go to foreign countries and bribe foreign officials in exchange for contracts. It is critical that firms recognize that a lot of investment authorities such as sovereign wealth funds (SWFs) are run by public officials and they need to be careful about how they work to unlock those investments. FCPA is not always on the forefront of people’s minds,” said James McGovern, chief of the Criminal Division at the US Attorney’s Office for the Eastern District of New York.
Several financial institutions have been hit with fines for FCPA breaches. BNY Mellon recently settled with the Securities and Exchange Commission (SEC) for $14.8 million after its asset management unit was accused of hiring interns related to an official who worked for a Middle Eastern sovereign wealth fund as a means to win further business. Och Ziff, the publicly listed hedge fund, is reportedly in talks with regulators about settling probes into some of its business activities in Africa, and potential breaches of the FCPA.
Numerous governments are taking a more proactive approach to punishing bribery abroad. The UK government passed the Bribery Act in 2010, which goes beyond that of the FCPA and prohibits the bribery of both foreign public and private sector officials as a means to win business. However, there have been very few prosecutions of entities accused of breaching the Bribery Act leading to accusations that UK enforcement agencies have adopted a light-touch approach.