The FCPA has two broad categories of offences: firstly, that of making a corrupt payment to any foreign official for the purposes of gaining a business advantage; and, secondly, the failure by foreign or domestic issuers of securities registered on a US stock exchange to comply with specific internal controls. The UKBA creates specific bribery offences (the offences of paying or receiving bribes by any person, and bribing foreign officials), as well as the additional offence applicable to commercial organisations, of the failure to implement adequate procedures to prevent bribery.
Both acts have significant extra-territorial jurisdiction and companies and individuals may be prosecuted for offences committed in a non-US or non-UK jurisdiction, by non-US or non-UK individuals, in respect of a non-US or non-UK group company. The FCPA and UKBA can establish jurisdiction through linking a US or UK company to the original transgression via that company's foreign group entities and their individual agents, employees or officers. By way of example: a Kenyan parent company that appoints an agent in Zimbabwe, who bribes a Chinese official for the benefit of the Kenyan parent company, could be prosecuted under the UKBA on the basis that a subsidiary of that Kenyan parent company - which had no involvement in the offence - is located in London.
The FCPA in particular has been extensively utilised to impose penalties and fines on non-US companies - in 2011 non-US companies were responsible for nine of the 10 largest penalties imposed under the FCPA, while non-US individuals constituted two-thirds of all individuals charged under the FCPA. Whilst the enforcement of the UKBA is still in its infancy, it is likely that it will be enforced in a similar manner going forward. Transgressors of the UKBA and FCPA also do not receive any relief, having been investigated and sanctioned in terms of one act - the same underlying conduct may give rise to liability in terms of the other.
In addition to civil sanctions, criminal penalties of up to USD25 million (corporations), and USD5 million and 20 year's incarceration (individuals) are applicable per violation under the FCPA. The significant penalties, disgorgements and settlements enforced under the FCPA send a firm message to global corporations and individuals, with 12 companies in 2012 settling FCPA enforcement actions worth a combined total of USD259.4 million (down from the 2010 high of USD1.8 billion paid by 23 companies), and 16 individuals receiving custodial sentences ranging from several months to several years in prison. Additional sanctions applicable to corporations may include: debarment from conducting business with the US government and various banks, the loss of export privileges and the compulsory imposition of a compliance monitor or independent consultant within the business.
The global glare of anti-bribery and anti-corruption legislation has Africa, and the multinationals conducting business in Africa, firmly within its sights, as is evidenced by an investigation initiated by the US Securities Exchange Commission ("SEC") and the Federal Bureau of Investigations ("FBI") into a local transaction between two African entities, one of which may fall within the scope of the FCPA due to its group having issued US-registered securities. Furthermore, an increasing number of countries have already, or are implementing anti-bribery and anti-corruption legislation - further widening the legislative net within which African entities and individuals may fall. These countries include China, Russia and India - notably comprising three of the five BRICS nations, of which South Africa is a member - and with whom African countries transact regularly.
Strong parallels can be made between African big industry and those industries that have historically borne the brunt of FCPA enforcements - government contracting, energy, technology, telecommunications, logistics, manufacturing, and tobacco - not to mention mergers and acquisitions within any sector. Thorough anti-corruption and forensic due diligence in mergers and acquisitions are integral in identifying and addressing existing FCPA, UKBA, and domestic anti-corruption issues during and immediately after the conclusion of mergers.
In spite of the seemingly unforgiving stance taken by the enforcement authorities relating to FCPA contraventions, there is encouraging news for organisations that are diligent in implementing anti-corruption measures. Case law has shown there to be ways in which companies may successfully defend or mitigate their liability under the FCPA. These include: close and regular monitoring of transactions that pose a corruption risk, clear internal guidelines prohibiting bribery and corrupt activities, and frequent training of employees and agents on internal policies. The benefits of strict compliance policies and diligent reporting are evident in the case of US vs Peterson (Morgan Stanley), where Garth Peterson, the former managing partner of Morgan Stanley's Shanghai real estate business, pled guilty to conspiracy to circumvent internal controls by transferring a multi-million dollar real estate interest to himself and a Chinese government official.
Morgan Stanley discovered Peterson's indiscretions through its internal anti-corruption controls, self-reported, and co-operated with the US Department of Justice ("DOJ") by instituting its own internal investigation. The result was that Peterson was sentenced to nine months in prison; the DOJ, however, resolved not to institute proceedings against Morgan Stanley and acknowledged it for its sound business practices (the relevant Morgan Stanley office had provided anti-corruption policy training 54 times, training Peterson seven times, and reminding him of his FCPA obligations at least 35 times).
It would be remiss of companies conducting business in Africa to ignore their potential exposure to the FCPA and UKBA (and other international and local anti-corruption legislation). It would be equally remiss of African companies to dismiss the value of establishing their own compliance policies and structures to complement those required by potential foreign investors. The drafting of internal anti-corruption policies, training and due diligence plays an integral role in mitigating corporate and individual risk. In addition, the prominence of international anti-corruption and anti-bribery legislation will undoubtedly have a noticeable effect on the contractual landscape, with extensive FCPA and UKBA compliance provisions becoming prominent features in all nature of contracts. More pressure will, in turn, be exerted on counterparties to agree to these provisions and without a clear understanding thereof, companies and individuals place themselves at risk of agreeing to onerous obligations with severe sanctions applicable for non-compliance thereof.
Whilst it remains to be seen how vigorously legislation such as the FCPA and UKBA will be enforced in Africa going forward, the old adage that it is "better to be safe than sorry" rings true. What we can be certain of is that given the current global economic situation, individuals, governments and corporations alike need to ensure that they are anti-corruption compliant.
Cameron Dunstan-Smith and Harriet Beamish are senior associates of Bowman Gilfillan.
