Re-thinking travel and expense compliance

  • December 08, 2023

The Foreign Corrupt Practices Act (FCPA) has never been more critical to businesses operating in a globalized environment, which is currently undergoing immense economic stress and uncertainty. When companies find themselves operating across international borders, it's important to maintain strict compliance with various regulatory requirements. One such requirement is the Foreign Corrupt Practices Act, which has a far-reaching impact, especially concerning travel and expense (T&E) management. The cost of FCPA non-compliance is high. “In 2022, the DOJ and SEC brought FCPA enforcement actions against eight companies and imposed financial penalties totaling $1.5 billion,” according to The FCPA Blog. To explore the impact of FCPA on travel and expense compliance, it's imperative first to understand FCPA.

Understanding FCPA

The Foreign Corrupt Practices Act was enacted in 1977 to make it unlawful to pay foreign officials to aid in obtaining or retaining business. The FCPA applies to U.S. companies and individuals, as well as foreign companies that are listed on the U.S. stock exchange. It has two primary provisions:

1. Anti-bribery provisions — These provisions prohibit U.S. companies and individuals from offering to pay, promising to pay or authorizing the payment of money or anything of value to a foreign government official and political parties to obtain or retain business. The intention is to eliminate the paying of bribes and level the playing field for all companies. Penalties for corporations that are convicted of violating these provisions can reach up to $2 million per violation. Individuals can face up to five years in prison and fines of up to $250,000 per violation.

2. Accounting provisions — These provisions require companies to maintain and keep accurate records of transactions and have effective internal controls to prevent bribery and corruption. Penalties for corporations that are convicted of violating these provisions can reach up to $25 million per violation. Individuals can face up to 20 years in prison and fines up to $5 million.

FCPA enforcement is a high priority for the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ). For example, FCPA enforcement settlements include:

  • 2023 — Albemarle Corporation agreed to pay approximately $103.6 million in disgorgement and prejudgment interest to resolve FCPA violations arising out of certain conduct in Vietnam, India, Indonesia, China and the United Arab Emirates.
  • 2022 — Gol Intelligent Airlines Inc., the second-largest carrier in Brazil, agreed to pay more than $160 million to the SEC, DOJ and Brazilian authorities to resolve FCPA violations for its involvement in a bribery scheme a senior executive orchestrated.
  • 2021 — Credit Suisse agreed to pay nearly $100 million to settle FCPA charges related to its role in three financial transactions on behalf of Mozambican state-owned entities.
  • 2020 — Goldman Sachs agreed to pay $1.66 billion to settle FCPA violations concerning the 1Malaysia Development Berhad (1MDB) bribe scheme.
  • 2019 — Ericsson agreed to pay $1.06 billion to settle FCPA violations for engaging in a large-scale bribery scheme involving the use of sham consultants to secretly funnel money to government officials in multiple countries.

Impacts of FCPA on travel and expense compliance programs

Travel and expense (T&E) compliance programs play a critical role in FCPA compliance and are at the forefront of a comprehensive FCPA program at the corporate level for adherence to anti-bribery and accounting provisions. There are five critical areas where a robust T&E management system will facilitate FCPA compliance:

1. Travel and expense program
The FCPA has stern restrictions on gifts, entertainment and hospitality that a company or individual may provide to foreign governmental officials and politicians. In 2022, an American multinational conglomerate paid more than $81 million to settle SEC charges that included offering $4 million in bribes to a high-ranking Brazilian government official. It's incumbent that companies establish a comprehensive T&E program that provides clear internal policies and procedures; compliance with global bribery laws, captures and audits 100% of expenses and automates the approval process. A robust program will identify FCPA regulatory violations and support remediation.

2. Culture and training
Regular and required training and education programs facilitate employees involved in travel and expense are well-versed in the requirements of the FCPA, communicating the consequences of failure to comply with its requirements. These training programs require continual review and updating, in collaboration with the company’s compliance and legal divisions, to ensure awareness of evolving compliance standards.

3. Third-party due diligence
Many businesses engage vendors or intermediaries in the foreign markets in which they operate. The FCPA holds these companies accountable for the actions of these third parties. Risk-based due diligence is imperative to understand the qualifications and associations of its third-party partners and ensure that these parties are FCPA compliant. In 2023, a Virginia corporation agreed to pay approximately $103.6 million in fines in part due to bribes paid to obtain and retain business as well as secure non-public information. These bribes were paid to decision-makers at a state-owned oil company in India by a third-party company consultant and sales agent.

4. Whistleblower protection
An additional provision of the FCPA provides protection from retaliation against people who report potential violations within their organizations. The establishment of policies and procedures for the protection of these individuals will encourage employees to report wrongdoing and assure them that complaints are treated confidentially and seriously.

5. Monitoring and assessment
Just because a company is compliant doesn't mean they'll remain compliant. Companies must regularly monitor and reassess their compliance with FCPA provisions. With changing regulations and economic environment, it's imperative data points gathered from the T&E program are reviewed and checked regularly to ensure the organization continues to follow proactive measures to identify and remediate any FCPA non-compliance.

The Foreign Corrupt Practices Act has a far-reaching impact on travel and expense compliance programs. Companies must understand these implications and work to maintain a T&E program that is transparent and includes thorough and accurate documentation, stringent compliance monitoring, consistent employee education and third-party due diligence.

At NTT DATA, we know from first-hand experience the challenges organizations face implementing a travel and expense program that supports adherence to the Foreign Corrupt Practices Act as well as other foreign and domestic regulations. With our partners, we offer an autonomous AI platform that audits 100% of all T&E expenses, finds errors, waste and fraud before payment and offers post-payment audit and analytics. If this is an obstacle you are facing, contact us for more information about our travel and expense compliance solutions and partnerships.

If this article resonates with you, contact us for more information about our Risk and Compliance solutions.

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Rosalind Conway
Rosalind Conway
Rosalind is a seasoned executive with more than 20 years of Big 4 regulatory global financial services consulting and regulatory compliance experience in governance, financial crime, enterprise/operational risk management, and privacy and data security. She is experienced in leading global, diverse multi-cultural and cross-functional teams, and collaborates with executive management, as well as IT internal and external organizations. Clients include global banks, federal bank regulators, investment advisors, broker dealers and insurance companies.
Derek Smith

Derek is a seasoned technology professional with more than three decades of experience in the financial services and healthcare industries. He has worked with top U.S. and global institutions, driving large-scale transformational initiatives. He has held several leadership roles, and he continues to lead global, multi-cultural, and cross-functional teams to deliver technology solutions. He specializes in driving client priorities in the areas of state/federal healthcare, e-commerce banking, compliance, and financial crimes.


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