This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.
Contrary to the opinion of many in the FCPA space, the BNY Mellon settlement and the looming actions against six major financial institutions for hiring practices is not a big shock or surprise. The SEC is not raising a new or novel interpretation of the FCPA. After all, assuming an actor has corrupt intent, there is no real question as to whether hiring a person related to a foreign official falls within the money of “anything of value.” FCPA practitioners are familiar with this issue and have helped clients navigate hiring pitfalls since the statute was enacted in 1977.
The SEC’s focus on hiring practices, however, should alert companies to re-examine their hiring policies and procedures to make sure they have adequately addressed the issue.
Companies have to be careful not to overreact to the BNY Mellon case (or any case for that matter) when addressing hiring practices (or other FCPA issues). To put it another way, companies should delineate and understand how to hire foreign officials, former foreign officials and close family members of foreign officials without violating the FCPA or any other anti-corruption law. That sounds like more than a mouthful, but it really is fairly simple.
When considering hiring a foreign official or person related to a foreign official, there are several questions that need to be asked:
- How did the candidate come to the attention of the company?
- What is the candidate’s connection to an existing or former foreign official?
- Does the company depend on the specific government institution to which the candidate is connected?
- Who in the company is promoting the hiring of the candidate?
- Is the candidate qualified?
- Has the candidate been subjected to standard hiring protocol (i.e. application, background check and interviews)?
- Has the company documented every step of the hiring process with respect to the candidate?
Every company needs to have a specific due diligence policy for the hiring of individuals directly from a foreign government or related to a government official. The policy need not be complicated or lengthy, but must focus on the above-listed issues.
As red flags appear, they must be resolved or added to the company’s calculation of whether to hire the individual or not. Many companies, particularly in the oil and gas industry, hire former foreign officials who retire from the government. There is nothing per se wrong with such a hiring so long as the hiring addresses the red flags, documents the reasons for hiring the official, and is clear of any indication of corrupt intent.
In many situations, there are qualified candidates that seek employment who have family connections with foreign officials. It is not unusual for such connections to exist. Companies have to be mindful of the connection, respond to the connection, apply its policies fairly and consistently and document every step it takes in this process.
The specific facts in each situation are critical. For example, if a company is approached by a foreign official who has significant impact on the company’s operations in a country and the foreign official demands that the company hire his or her relative who is unqualified for the job, a company would be foolish to hire the relative.
On the other hand, if a candidate applies for a job through the normal channels, is well qualified for the job, is related to a foreign official who has no existing or potential influence over the company’s business and that official recommends his or her relative as a strong candidate, the company should be able to hire the individual if it so chooses.
The challenge for a compliance officer working with the human resources staff is to step carefully in this area, conduct a thorough due diligence of corruption risks and document every step to support the non-corrupt, or legitimate, reasons for hiring the candidate.