Few subjects receive as much attention in legal, compliance, and accounting circles today as the U.S. Foreign Corrupt Practices Act (FCPA). Signed into law in 1977, the FCPA has seen increased enforcement over the past few years with no indications of abatement in sight. The law makes it unlawful for a company, its employees, or its agents to make corrupt payments to a foreign official for the purpose of obtaining or retaining business.

Enforcement of this law has been stepped up. From 2009 to 2010 the number of investigations brought by U.S. regulators nearly doubled; more than 250 investigations are currently being pursued by the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC). Against this backdrop of heightened enforcement activity, it is imperative that organizations conducting business abroad actively engage in anti-corruption compliance programs.

There is no substitute for a well-designed, robust FCPA compliance program, which should include:

• a clearly stated ethics policy specifically prohibiting enumerated actions that violate the FCPA and other anti-corruption laws (with appropriate consequences for violations and failure to appropriately monitor);
• senior-level oversight of the FCPA compliance program, carefully structured and vetted to avoid involvement by personnel with incentives or propensity to condone violations;
• accounting measures to comply with books, records, and internal controls requirements;
• extensive vetting and memorializing of foreign agent relationships to avoid improper behavior by business partners;
• senior management review of agent relationships;
• frequent training of employees, officers, and agents concerning the obligations and prohibitions of the FCPA and other applicable anti-corruption laws;
• internal reporting mechanisms permitting secure referral of corruption issues;
• more frequent audits of operations in problematic jurisdictions or sectors of a business; and
• frequent review and revamping of all FCPA-related policies and procedures.

No compliance program, however, is foolproof. Organizations should be prepared to handle the inevitable internal investigation, regulatory investigation, and follow-on securities class-action lawsuits and shareholder derivative lawsuits likely to accompany an FCPA violation.

Although strong relationships with experienced FCPA investigation defense providers—including law firms and accounting firms—is a must, appropriate insurance arrangements can also help to ensure that the costs associated with defending such an action do not negatively affect the company and its directors and officers. A well-crafted directors and officers (D&O) liability insurance policy can provide some limited measure of protection to insured individuals, but it will not cover the corporate entity itself.

New insurance products recently introduced to the market, including Marsh’s FCPA Corporate Response, provide additional FCPA investigation costs coverage for the insured entity and greater protection for insured directors and officers. A robust compliance program combined with insurance protection is the best defense against FCPA violations and investigations.

Marsh’s FCPA Corporate Response

A well-crafted directors and officers (D&O) liability policy can provide some protection to insured individuals in the event of an FCPA action, however, the company itself is generally excluded from coverage. To fill this coverage gap, the financial and professional risk experts in Marsh’s FINPRO Practice worked with major global insurers to develop FCPA Corporate Response. The first insurance policy of its kind, it covers both individuals and the organization for FCPA investigation costs.

FCPA Corporate Response is designed for any company that conducts business outside of the United States regardless of size, revenue, or industry sector. It provides reimbursement for investigation costs including legal, accounting, auditing, and consulting fees stemming from an FCPA or related action.

FCPA Corporate Response:

• Responds to anti-corruption probes of foreign regulatory bodies to the extent that they parallel the FCPA’s anti-bribery provision.
• Protects a company from expenses incurred in defending itself.
• Acts as primary insurance to a D&O policy.
• Preserves D&O liability policy limits for other uses.
• Includes free comprehensive diagnostic and benchmarking analyses.
• Provides access to consultants, including accountants and attorneys, fluent in FCPA investigations and issues.

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