In context

FCPA pilot of voluntary self-reporting becomes permanent

January 18, 2018
In context

The DOJ has decided to make the Foreign Corrupt Practices Act Pilot Program permanent. The pilot started on 5 April 2016 (see our In context article) and was extended on 10 March 2017. The DOJ used the pilot to encourage companies to self-report violations of the FCPA in exchange for lenient treatment. Under the pilot, companies received credit if they voluntarily self-disclosed FCPA-related conduct, fully cooperated with the DOJ, and timely and appropriately remediated any shortcomings. The type of credit companies could receive under the pilot included a reduction in criminal fines of up to 50%, avoidance of a compliance monitor, and non-prosecution. According to DOJ Deputy Attorney General Rod Rosenstein, the pilot has been very successful over the last 18 months, and he has announced a revised FCPA corporate enforcement policy. Under this policy you may presume a declination, unless there are aggravating circumstances or the offender is a recidivist.

In a speech delivered on 29 November 2017, the DOJ’s Deputy Attorney General Rod Rosenstein described the success of the pilot so far. During the 18 months that the pilot was in effect, 30 voluntary self-disclosures were received, compared to 18 in the previous 18 months. Seven of the self-reporting companies received a declination (a decision not to prosecute; see In context of 13 November 2016 and In context of 15 June 2016). Concluding that the pilot programme is a step forward in fighting corporate crime, Rosenstein announced a revised FCPA corporate enforcement policy. That policy is now featured in the US Attorneys’ Manual (9-47.120), which is a guide for federal prosecutors nationwide. As the DOJ expects the new policy to increase voluntary disclosures, improve a company’s compliance, and provide the ability to prosecute culpable individuals, the DOJ has implemented several changes to the pilot programme.


First, the mitigation credit a company can receive if it complies with the DOJ’s conditions may disappear if there are aggravating circumstances related to the nature and seriousness of the offence or the offender. Aggravating circumstances may disqualify the company from receiving a declination. The guidelines list what qualifies as aggravating circumstances, such as the involvement of the company’s executive managers in the company’s misconduct or criminal recidivism. The difference between the pilot and the policy is that under the pilot program, the credit a company could receive included a reduction in criminal fines of up to 50% different with a possibility to receive a declination. Under the new policy, there is a presumption that the DOJ will resolve the case through a declination.


Second, when in such a case aggravating circumstances compel an enforcement action, the DOJ will recommend a 50% reduction of the lower part of the Sentencing Guidelines fine range. Again, criminal recidivists may not be eligible for this credit.


Third, the policy includes hallmarks and examples of an effective compliance and ethics programme and of how the DOJ will evaluate the programme. Examples of an effective programme include the fostering of a culture of compliance, designating sufficient resources for compliance activities, and ensuring that experienced compliance personnel have appropriate access to management and the board. Timely and effective implementation of these programmes may protect the company from having to appoint a monitor.


Finally, there is also a more formal change. The enhanced policy will no longer be in the form of a lengthy, written memo, carrying the name of the Deputy Attorney General who wrote it (such as the Yates Memo, see In context of 14 October 2015). It is now incorporated into the US Attorneys’ Manual. By doing this, the DOJ wishes to provide greater certainty for companies.


Other features of the FCPA guideline are;

  • the requirement that all benefits resulting from the misconduct should be repaid
  • the possibility of a limited mitigation credit for the companies which, despite non-disclosure of the violation, choose to fully cooperate and adopt remedies in accordance with the policy standards. This type of credit may amount to a 25% fine reduction
  • the companies are expected not only to fully disclose their own misconduct, but also all information known to them about the potential misconduct of third parties.


Companies have to bear in mind that even if all criteria for credit are met, all profits resulting from the FCPA violation will need to be disgorged. At the same time, the open-ended character of what constitutes aggravated circumstances leave a level of uncertainty for companies facing potential violations of a more complex nature. However, the permanent status of the policy provides an increased level of certainty for companies that decide to self-report. Future cases are required to fully analyse the way in which this policy is being implemented in practice. We will provide further updates and guidance as this develops.

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