2016 FCPA Year in Review

February 16, 2017

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2016 was a banner year for global anti-corruption and US Foreign Corrupt Practices Act (FCPA) enforcement.  Coming on the heels of 2015, a year in which the US Department of Justice (DOJ) and US Securities and Exchange Commission (SEC) brought their lowest number of enforcement actions for a decade, 2016 not only resulted in the largest number and highest dollar-value of FCPA corporate enforcement actions in a single year, but also reflected the impact of new policy directions.  In 2015, the agencies brought a combined total of 23 FCPA-related enforcement actions, 11 by the DOJ, and 12 by the SEC, accounting for a combined US $142.7 million in monetary sanctions.  In contrast, 2016 saw 37 SEC and 24 DOJ enforcement actions resulting in US $2.43 billion in monetary penalties (including disgorgement) to be paid to the federal Treasury.  Those numbers were not just the result of one or two large, “blockbuster” matters as has been the case in some prior years, but rather a larger number of all types of settlements: large matters imposing monetary sanctions running into the hundreds of millions of dollars; prosecutions of individuals; and a number of smaller resolutions by the SEC where the DOJ either would not or could not prosecute.  This heightened level of 2016 activity also spilled into the first weeks of 2017, with a number of corporate and individual enforcement actions announced just after the new year as well.

The 2016 enforcement resurgence is less the result of any renewed commitment to FCPA enforcement (as we explained in our 2015 Year in Review), than a reflection of a number of factors: the targeting of individuals; DOJ’s willingness to progress some investigations more quickly than in the past; multiple investigations arising out of common facts in the same industry or country; and unprecedented cooperation and coordination between US enforcement authorities and their counterparts in Brazil, the UK and other countries around the world.  While the longer-term outlook for FCPA and transnational criminal law enforcement is less certain with the change in administration than it may have been at any time in recent decades, we nevertheless see these trends continuing into 2017.[1]

More important than the headline numbers and trends, however, are the enforcement policy developments which drove the DOJ’s and SEC’s enforcement efforts in 2016.  Whereas September 2015 saw the DOJ release the so-called Yates memorandum, which highlighted the DOJ’s enforcement focus on individuals, in April 2016 the DOJ announced its FCPA “Pilot Program”, which was aimed at incentivizing corporate self-reporting in order to generate more and better information regarding individual misconduct in return for significantly more lenient terms of settlement or even outright declinations.  Although not formalized in a written policy document, the SEC also appeared to institute its own enhanced incentives to reward voluntary disclosure and focus on individuals.  Both the DOJ and SEC appeared to advance their stated goals of focusing more on cases consistent with their core mission – the DOJ on larger, criminal matters, and the SEC those affecting US issuers, and both on individuals. 

2016 also saw the continuation of some longer-term enforcement trends we have previously identified: the use of alternative or additional means to investigate and prosecute transnational corruption, such as through the DOJ’s Kleptocracy Initiative; using non-FCPA statutory tools to bring prosecutions (such as in connection with the FIFA-related scandals); and significantly enhanced cooperation with overseas enforcement officials.  There was continued unpredictability in what countries or activities would produce the next set of investigations and enforcement priorities.  Where in years past it may have been less common for allegations to find their way unexpectedly into the public domain, 2016 saw the Unaoil exposé, numerous investigations resulting from internal and external whistleblower reports (many prompted by Dodd-Frank-promised bounties), and the Panama Papers data leaks expose the extent of the use of offshore tax structures and secret bank accounts by a large number of corporations, politicians and wealthy individuals.  Coupled with the ever-increasing formal and informal links between domestic US enforcement officials and their counterparts overseas, the unpredictable source and nature of global investigations is a phenomenon that is very likely to continue.

Of course, political developments in the US, UK and elsewhere in 2016 have made the policy and enforcement outlook for 2017 and beyond more uncertain.  While the agencies’ enforcement programs may not visibly change in the short-term as a result of the change in US administration, we would not be surprised to see legislative proposals to amend the FCPA, which failed to gain traction in prior years, re-introduced into the US Congress, along with other legal, regulatory and policy initiatives intended to foster a less-regulated business climate.[2]  Whether the enforcement authorities will enjoy the same level of resources and foreign cooperation as in recent years is also uncertain, but those expecting wholesale change in the statute and/or dramatic enforcement changes are in our view likely to be disappointed.  The FCPA is no longer the unilateral measure that it once was, but operates in an international context.  While both the statute and the enforcement program can be improved, in our view it would be unwise for companies to conclude that they no longer need to invest in compliance. 

Please click here to view the full report.


[1]  The first weeks of 2017 have already seen a major multi-jurisdictional resolution involving UK engineering company Rolls-Royce; a number of individual resolutions, including guilty pleas entered into by two businessmen related to their role in a scheme to corruptly secure business from Venezuela’s state-owned and state-controlled energy company Petróleos de Venezuela S.A. (PDVSA) and an indictment against four individuals alleged to have engaged in a corrupt scheme to bribe government officials in a Middle East country to facilitate the sale of a commercial building in Vietnam.  Additional corporate resolutions, including settlements between the SEC and Mondelez for alleged inadequate controls over a consultant relationship in India, and SQM for making payments to Chilean political figures funneled through third parties and vendors, have also already been concluded in 2017.

[2] Indeed, in February 2017, Congress passed a joint resolution under the Congressional Review Act to nullify the Disclosure of Payments by Resource Extraction Issuers Rule, which mandates that extractive industry issuers disclose certain payments to foreign governments to the SEC.  At this writing, the resolution has been presented to the President for signature.  See Congress, Actions Overview: H.J. Res. 41 — 115th Congress (2017–2018) (last visited February 10, 2017), https://www.congress.gov/bill/115th-congress/house-joint-resolution/41/actions.  Acting SEC Chairman Michael Piwowar also announced that the agency intends to reconsider enforcement of the Dodd-Frank ‘Conflict Minerals’ rule, which requires companies to disclose information about the origination of certain ores and derivative metals in the supply chain. Dave Michaels, SEC to Reconsider Enforcing ‘Conflict Minerals’ Rule, Acting Chief Says, Wall St. J. (Jan. 31, 2017, 8:43 PM), https://www.wsj.com/articles/sec-to-reconsider-enforcing-conflict-minerals-rule-acting-chief-says-1485913422.