DOJ and SEC Issue First Major Update to the FCPA Guide Since 2012
Earlier this month, the Criminal Division of the Department of Justice (DOJ) and the Enforcement Division of the US Securities and Exchange Commission (SEC) released the second edition of "A Resource Guide to the US Foreign Corrupt Practices Act" (2020 Guide). This was DOJ's first major update to the influential handbook since it was originally published in 2012 (2012 Guide). Like the original version, the 2020 Guide is a handy and comprehensive compilation of valuable information and helpful insights into DOJ and SEC's current thinking on the Foreign Corrupt Practices Act (FCPA) and its enforcement. The updated edition, which maintains the structure and much of the content of the 2012 Guide, does not announce any new policies or offer any real surprises for those familiar with the FCPA. However, the 2020 Guide incorporates key policy developments, relevant case law, and enforcement actions from the past eight years, reflecting the continuing evolution of anti-corruption law, practice and compliance.
These changes and updates, the most significant of which are discussed below, should help to ensure that the guide remains a go-to resource for counsel and companies seeking to understand how US authorities interpret and enforce the FCPA against companies and individuals.
For further analysis of the substantive changes between the 2012 Guide and the 2020 Guide, see Arnold & Porter's "DOJ and SEC Release Second Edition of FCPA Guide" Advisory. In addition, a version of the 2020 Guide with new material highlighted can be found here.
Notable Changes in the 2020 Guide
Addition of Recent FCPA-Related Policies and Practices
The 2020 Guide discusses several FCPA-related policies and other guidance materials that DOJ has announced since the publication of the 2012 Guide:
- FCPA Corporate Enforcement Policy (CEP) (for further analysis of the CEP, see Arnold & Porter's "DOJ Announces New FCPA Corporate Enforcement Policy" Advisory)
- Policy on Coordination of Corporate Resolution Penalties
- Selection of Monitors in Criminal Division Matters
- Criminal Division's Evaluation of Corporate Compliance Programs (for analysis of the original guidance as well as the June 2020 update, see Arnold & Porter's "DOJ Issues New Guidance on Evaluating the Effectiveness of Compliance Programs" and "Updated DOJ Guidance on Evaluation of Corporate Compliance Programs Provides Additional Detail to the Existing Framework for Program Assessment" advisories.
Incorporation of Guidance on Successor Liability and Limitations Periods
The 2020 Guide also adds guidance on several areas of FCPA enforcement that are frequently the subject of uncertainty or confusion, including:
- Successor liability: Using two recent enforcement actions as examples, the 2020 Guide discusses the factors that US authorities consider when making charging decisions in the context of mergers and acquisitions, emphasizing that when an acquiring company has uncovered and timely remedied violations, DOJ and SEC have generally pursued enforcement actions against the predecessor company rather than the acquiring company.
- Statute of limitations for criminal violations of the accounting provisions: In one of the few surprises in the 2020 Guide, the updated guidance states that DOJ considers criminal violations of the FCPA's accounting provisions to be "securities fraud offenses" and thus subject to a six-year statute of limitations.
- Statute of limitations for disgorgement: The 2020 Guide addresses the US Supreme Court's 2017 decision in SEC v. Kokesh, holding that disgorgement, frequently an element of FCPA-related corporate settlements, is subject to a five-year limitations period, and also references the Supreme Court's June 2020 decision in SEC v. Liu, in which the court found that disgorgement can (under certain conditions) constitute proper equitable relief rather than an improper penalty. For additional information and analysis of the Liu decision, see Arnold & Porter's Advisory "Supreme Court Upholds—but Also Limits—SEC Disgorgement Authority" and Enforcement Edge blog post "SCOTUS OKs SEC Disgorgement—But Imposes New Limitations."
New Case Law
In addition to the Kokesh decision, the 2020 Guide addresses several recent important cases and their significance for FCPA-related jurisprudence, including cases addressing issues such as the definition of an "instrumentality" of a foreign government, the narrowness of the local law affirmative defense, and when aiding and abetting and conspiracy charges can be brought in the FCPA context.
Recent Enforcement Actions
The 2020 Guide includes helpful updates to case studies and hypotheticals while adding examples from post-2012 enforcement actions to discuss topics including gifts or payments to third parties; payments to employees of agencies and instrumentalities of foreign governments; liability for the misconduct of third-party agents or intermediaries; ineffective internal controls and compliance programs; and the assessment of FCPA penalties, among other subjects.
Investigation, Analysis, and Remediation of Misconduct
The 2020 Guide adds a new "Investigation, Analysis, and Remediation of Misconduct" subsection to its "Hallmarks of an Effective Compliance Program" that discusses the effectiveness of a compliance program as measured by how it responds to misconduct.
The 2020 Guide discusses how the CEP and the Principles of Federal Prosecution of Business Organizations aid DOJ in deciding whether to bring an enforcement action under the FCPA. The 2020 Guide notes that DOJ's implementation of the CEP is intended to provide additional incentives and benefits, including a presumption of a declination, to companies that meet DOJ's standards for voluntary self-disclosure of misconduct, full cooperation, and timely and appropriate remediation, including payment of all disgorgement, forfeiture, and/or restitution resulting from the misconduct at issue.
© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.