U.S. federal prosecutors recently investigated Wal-Mart de Mexico, Wal-Mart Stores, Inc.’s largest foreign subsidiary, for alleged violations of the Foreign Corrupt Practices Act (FCPA). The FCPA is a U.S. criminal statute prohibiting bribery of foreign government officials to obtain or retain business. It generally applies to U.S. companies and citizens. U.S. companies doing business outside the country must be aware of FCPA prohibitions and understand when and how it is enforced to avoid costly investigations. Wal-Mart expects to pay between $130 and $150 million in FCPA and compliance-related costs for the 2015 fiscal year.
However, the FCPA is no longer the only anti-corruption law U.S. companies need to pay attention to when conducting business abroad. Several countries have adopted their own anti-corruption legislation, including Mexico. Some mirror the FCPA, while others are more inclusive. For example, the UK Bribery Act prohibits bribery in general, regardless of whether the recipient of the bribe is a government official or private citizen.
Additionally, violations of anti-corruption laws rarely occur in a vacuum. An investigation by one foreign government under its anti-corruption statute may very well trigger an investigation by the U.S. government under the FCPA—and cross-border cooperation between governments has improved considerably in recent years. U.S. and Mexican officials, for instance, both participated in the Wal-Mart de Mexico investigation.
While the number of FCPA enforcement actions remains relatively consistent year to year, the dollar amount of settlements is on the rise. In 2014, the Department of Justice and Securities and Exchange Commission collected a combined $1.56 billion in FCPA recoveries—double the amount collected in 2013. Outside the U.S., a number of countries with newly adopted anti-corruption laws have reported significant increases in enforcement actions, including China, Brazil and European Union member states. To avoid hefty fines and possible prison sentences, multinational companies must understand the global anti-corruption landscape—especially in countries intent on making significant efforts to crack down on corruption, like Mexico.
In 2012, Mexico adopted the Federal Law Against Corruption in Public Procurement (Ley Federal Anticorrupción en Contrataciones Públicas—LFACP). Like the FCPA, the LFACP prohibits companies and individuals from offering money or gifts to secure a business advantage in the procurement of public contracts with the Mexican government. The law also criminalizes bribery of non-government officials. However, since its enactment, the LFACP has rarely been enforced. The problem in many jurisdictions is not a lack of anti-corruption laws, but the enforcement of those laws.
Earlier this year, the Mexican Chamber of Senators approved a constitutional reform to address the Mexican legal system’s shortcomings in enforcing anti-corruption efforts. The new framework, called the National Anti-Corruption System (Sistema Nacional Anticorrupcion—SNA), does not create new corruption crimes, but does strengthen penalties for corruption and sends a clear message that the Mexican government intends on enforcing violations of the LFACP.
Notably, the reforms introduce a whistleblower provision allowing citizens to report corrupt activities to the Mexican House of Representatives. Additionally, the SNA will coordinate enforcement efforts at the municipal, state and federal level and will (1) establish the Federal Tribunal of Administrative Justice and appoint a special prosecutor to impose sanctions on violators, (2) require states to do the same, (3) require public servants to declare their assets and interests, (4) extend the statute of limitations for serious administrative misconduct from three to seven years and (5) allow the Federal Audit Office and Public Administration Ministry to investigate and conduct audits more frequently and advocate for enforcement of violations against potential violators.
In light of new country-specific anti-corruption laws, a rise in enforcement actions globally and the multi-jurisdictional cooperation of such enforcements, U.S. based multinational companies must recognize their compliance obligations with the FCPA and local anti-corruption legislation—especially in countries like Mexico, where many expect the government to ramp up its enforcement activity.