FBI’s new Miami International Corruption Squad sends clear message to South Florida businesses

Miami

White Collar Alert

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The FBI's International Corruption Unit's mission is to investigate foreign corruption, including suspected violations of the Foreign Corrupt Practices Act – the US law prohibiting bribery of foreign government officials. Thus, the FBI's March 5, announcement that it created a new Miami-based International Corruption Squad rightfully caused South Florida's business community to sit up and take notice. FBI officials revealed that the Miami Squad will focus on investigating money laundering and corruption in Miami and South America.

On the heels of the FBI's announcement, on March 7, Rod Rosenstein, the outgoing deputy attorney general, focused one of his final speeches in that role on FCPA enforcement and compliance. In addition to issuing strong reminders of the social and economic ills of corruption, he also touted the Department of Justice's impressive track record in FCPA enforcement actions, cooperation with its foreign regulatory counterparts, and continued focus on holding individual wrongdoers accountable for corrupt conduct. But what does this really mean for your business?

Miami as an international economic powerhouse remains the primary gateway to Latin America and the Caribbean. With that distinct honor comes unique challenges and closer regulatory scrutiny. For example, in November 2018, the Department of Treasury's Financial Crimes Enforcement Network issued a fifth extension to its January 2016, Geographic Targeting Order requiring title insurers to identify individuals with beneficial interests in companies purchasing residential real estate in excess of $1 million in South Florida through all-cash transactions. Notably, this most recent six-month extension decreased the purchase threshold to $300,000 and highlighted that GTOs are generating substantial evidence of foreign corruption, fraud, money laundering and other illicit conduct connected to covered South Florida real estate transactions. The FBI's addition of the Miami Squad is just the latest evidence that decision-makers at the highest levels of the federal government are focused on investigating and prosecuting illicit activity with ties to South America and South Florida.

This increased regulatory focus, the significant cross-border transactions between Miami and our neighbors to the south, and the large number of Latin American headquarters based in South Florida, made it a foregone conclusion that the FBI would establish a Miami Squad.

In the past two years alone, over a dozen companies, and in many cases their executives, have been investigated or prosecuted for FCPA violations for conduct in Latin America and the Caribbean–often based on cross-border collaboration between US regulators and their international counterparts. In addition, regulators in South America, particularly Brazil, Argentina and Chile, have increased their focus on corruption, bribery, and corporate compliance programs. Thus, the uptick in enforcement activity in the region, coupled with continued cooperation and collaboration among US and South American regulators in rooting out corruption and bribery, are clear signals that although the United States remains the world leader and standard bearer in bribery and corruption enforcement, it by no means is fighting this fight alone.

In an effort to garner support in this fight from the business community, the DOJ has doubled‑down on its message that companies should self-report potential FCPA violations and cooperate with the DOJ's investigation in exchange for leniency. The DOJ's FCPA Corporate Enforcement Policy incentivizes companies to self-disclose FCPA violations by permitting the DOJ to decline to prosecute a company (ie, to issue a "declination") in matters where the company:  voluntarily discloses its potential FCPA violation to the DOJ; cooperates with the DOJ's investigation; conducts a comprehensive internal investigation of the conduct; and timely remediates the FCPA violation by implementing an effective compliance program and disciplining culpable employees. Since 2016, the DOJ has issued formal declination letters to twelve companies.  In each, the DOJ clearly memorialized that the company earned a declination due to satisfying the factors listed above, paying a significant fine, penalty, or disgorgement amount and implementing an effective corporate compliance program. In his March 7 remarks, Rosenstein reiterated these points, reminded the business community of the importance of maintaining a culture of integrity and compliance, and highlighted the legal, practical and economic benefits of effective corporate compliance programs.

Now that we can expect increased regulatory scrutiny in our own backyard, it is more critical than ever for South Florida companies to ensure they maintain a close eye on operations in Miami and Latin America and implement and maintain strong and robust corporate compliance programs. Following are 10 practical tips companies should consider, with the assistance of experienced counsel, in doing so:

  • Current compliance program: Evaluate your company's current corporate compliance program for effectiveness at addressing company-specific risks.
  • Foreign risks: Identify operations in Latin America with the highest risks of facilitating bribery and corruption.
  • Training: Ensure employee training is effective, relevant, consistent, and up-to-date.
  • Audit: Conduct regular audits and monitoring activities, in particular of two of the highest risk areas for improper payments:third-party activities and payments; and employee travel and entertainment expenses.
  • Third-party activities: Implement a program for third-party due diligence and ongoing compliance.
  • Hotline: Implement an employee hotline to encourage internal reporting of issues without fear of retaliation.
  • Red flags: Stay abreast of red (and yellow) flags in your company, region, and industry.
  • Set the appropriate tone at the top, middle and front lines: Ensure that management sets a tone of commitment to compliance and zero tolerance of bribery and corruption that resonates throughout your company.
  • Compliance as a performance metric: Include ethics and compliance standards, not just sales targets, as metrics in employee performance reviews.
  • Know your company: Conduct an in-person proactive risk assessment so that legal and compliance can better understand risks and challenges of global operations.

While the FBI's recent announcement sent a clear message that cross-border corruption will be pursued, it also offers companies the opportunity to improve their corporate compliance programs and their operations in South Florida, Latin America and the Caribbean. South Florida companies would be well-served by taking note of Rosenstein's observations: company with a robust compliance program can prevent corruption and eliminate the need for enforcement." And what company wouldn't want that?

This article originally appeared in the Daily Business Review on March 11, 2019.

 

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