Five Key Trends in ABAC Enforcement Demand A Strategic Response

In the rapidly evolving anti-bribery and anti-corruption (ABAC) enforcement environment, boards and senior managers need a strategic approach to tackling this issue more than ever before. The volume of enforcement activity continues to be high. Investigations and prosecutions in the US remain robust in spite of initial concerns about the impact of Trump administration policies, and global monetary sanctions imposed by the world’s regulators on entity groups in US Foreign Corrupt Practices Act (FCPA)-related investigations totaled $3.2 billion in 2018, the second highest total over the past decade.

When it comes to ABAC, it’s not just jurisdictional enforcement borders that are becoming more porous. The boundaries of organizations are more permeable too, creating significant ABAC risk. Third parties continue to be a significant source of ABAC compliance weakness for companies – in the US, 75% of 2018 cases involved a third party. Below are five of the top trends for enforcement for 2019 that companies should consider when developing their ABAC strategy:

1. Using deferred prosecution agreements – Deferred prosecution agreements (DPAs) are becoming an increasing feature of ABAC cases outside of the US, where DPAs have been in use for some time. Since their introduction in 2014, the UK SFO has secured four DPAs, which have seen more than £670m of financial penalties paid by companies to the Treasury – three of these are ABAC cases. Over the next five years, it’s likely that DPAs will be used more frequently by more jurisdictions in ABAC cases, including France, Brazil, Singapore, Argentina, Japan, Australia, and Canada.
2. Evolving environment around prosecution of individuals – Many governments around the globe continue to say they are increasing their emphasis on the prosecution of individuals in ABAC cases. The actual track record of prosecutions is a bit more mixed. For example, according to the Stanford Law School’s 2018 FCPA Year in Review, the number of individuals prosecuted by the US Department of Justice (DOJ) for FCPA-related offenses decreased “markedly” between 2017 and 2018. Over the past five years, just 29% of all corporate criminal actions have involved a related criminal prosecution of company employees or agents. Yet, the US “mood music” about individual accountability continues to be strong. In November 2018, DOJ deputy attorney general Rod Rosenstein reiterated the DOJ’s focus on this, and stressed that organizations have a responsibility to disclose potentially criminal activities by employees. However, he modified the DOJ’s existing approach – articulated in the “Yates Memo” – slightly by indicating that companies no longer have to disclose all employees who were involved in a particular case. Instead, companies must “identify all individuals substantially involved in or responsible for the misconduct at issue.” This change was designed to make the information-gathering process during an investigation more efficient and does not signal a “lightening up” by the DOJ on ABAC enforcement.
3. Increasing World Bank and multilateral development bank (MDB) influence and enforcement – Since 2010, the World Bank has entered into more than 50 cooperation agreements with regulatory agencies, government departments, and other bodies to promote ABAC initiatives. It’s also taking a tougher line on bribery and corruption in its own projects, debarring 78 companies and individuals from working with the World Bank in the future during FY2018. The World Bank recognized another 73 debarments from other multilateral institutions. Over the next few years, companies can expect to the World Bank to put even more weight behind its ABAC program, exerting significant ethical and enforcement influence globally.
4. Growing coordination among governments and regulatory authorities – Countries – encouraged by the OECD – are cooperating more closely than ever before on ABAC enforcement. For example, 52% of Securities and Exchange Commission (SEC) and DOJ press releases noted foreign assistance in the prosecution of FCPA enforcement actions. New frameworks are being created to facilitate anti-corruption investigations, including information sharing agreements. Some nations are providing other nations with ABAC training for their investigators. There is also a developing trend for multijurisdictional settlements. This is creating a range of new risks for companies –companies can find themselves being investigated and prosecuted in multiple jurisdictions, escalating legal complexity. On a more positive note, in May 2018 the US DOJ’s Rosenstein announced that the US would now be actively discouraging the “piling on” of penalties related to the same violation among US agencies and foreign governments.
5. Developing use of social media and investigative journalism – Although traditionally ABAC “enforcement” has taken the form of legal prosecutions by government agencies, today this is changing. A kind of informal prosecution is now possible in the traditional media through increased investigative journalism and data leaks. Individuals and organizations who are advocating for ABAC are able to turn to social media to air their concerns about an individual company. All of this is putting more pressure on governments and politicians to fight bribery and corruption in their own countries. Companies who are targeted in either way could feel the legal system is gentle in comparison – the reputational damage caused by these evolving forms of prosecution of ABAC issues could be significant.

In summary, ABAC enforcement is escalating in a variety of different ways. Bribery and corruption risk has never been greater for companies – both in terms of the likelihood of being subject to some form of investigation and prosecution, and the impact that such an event could have on finances and reputation. With third parties continuing to be a significant source of ABAC compliance weakness, it’s important for companies to think strategically about ways to mitigate this challenging source of enterprise risk.

Watch our webinar where regulators share insights on mitigating third-party FCPA risk.

Webinar – Controlling Third Party Corruption:
A Conversation with FCPA Regulators

We will explore how ABAC risk manifests itself in regards to third-party relationships, how the global regulatory landscape applies to third parties and discuss some top ethics and compliance priorities regulators will be looking for in your third party ABAC compliance program.