How does a corporate compliance function work to prevent corruption when the customer is part of the bribery scheme? Compliance professionals should enhance their controls and oversight to both detect and prevent this new Foreign Corrupt Practices Act wrinkle, as this situation cropped up in three separate FCPA enforcement actions in 2018.
In September, the Petrobras FCPA enforcement action set many new standards, including the highest FCPA penalty in history. The corruption was so massive that the Justice Department said in the non-prosecution agreement (NPA) that the total amount of corruption was over $2 million, but “the precise number is unknown.” Yet, for the compliance professional, one of the most important lessons was how the pot of money to pay the bribes was generated. The NPA stated, “The money to pay the bribes was often funneled through fictitious costs, including consultancy agreements, incurred by the contractors in association with Petrobras … creating conditions … that allowed for the contractors to continue generating the funds needed to make the corrupt payments.” These inflated amounts paid to the corrupt contractors were capitalized as legitimate costs and hidden as part of the particular contracts by Petrobras. These excess funds were then transferred by the corrupt companies to offshore bank accounts.
