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By Yin Wilczek
July 22 — The global ramp-up in anticorruption enforcement is creating a minefield for multinational companies, especially financial services firms, attorneys said July 22.
Under the U.S. regime, “politically exposed persons” (PEPs)—individuals who are affiliated in some way with a foreign government—are an increasing risk area, said Laurence Urgenson, a partner in Mayer Brown LLP's Washington office.
Meanwhile, the U.K. Serious Fraud Office (SFO) has signaled a new approach in which it is encouraging self-reporting as well as the possibility of a deferred prosecution agreement (DPA) for cooperating companies, said Alistair Graham, a London-based Mayer Brown partner.
However, the SFO also has said it will challenge incorrect claims of privilege in connection with anticorruption probes, which may be a “sticking point” that stymies such pacts, Graham added. Whether companies must waive privilege to obtain a DPA is “an issue that will be debated heavily going forward.”
Urgenson and Graham spoke at a webcast with other Mayer Brown partners.
The focus on PEPs is evident from U.S. regulators' ongoing anticorruption investigation of Petrobras and, to a lesser extent, the Federation Internationale de Football Association, Urgenson said.
With that in mind, financial institutions must review politically affiliated customers—individuals as well as foreign state-owned enterprises—for whom they hold custodian accounts, Urgenson said. In addition, “you want to look at raising funds at government sources such as the sovereign wealth funds, and any of your marketing activities aimed at receiving funds from government entities.”
In the U.K., Graham observed that SFO Director David Green is fighting budget cuts and the possible abolition of his office. In addition, Green's contract comes up for renewal in April 2016, Graham noted. Accordingly, Green is looking to deliver a DPA in a major case as well as launch a successful prosecution under Section 7 of the U.K. Bribery Act.
The Bribery Act applies to U.K. companies as well as other companies with a presence in the U.K. Section 7, a strict liability provision, makes it an offense for failing to prevent a bribery. The U.K. has yet to prosecute anyone or any company under the provision.
Graham observed that the SFO and Barclays reportedly are discussing a possible DPA with respect to allegations over the bank's Qatar dealings. How that plays out may provide a roadmap of sorts going forward, he suggested.
The major “sticking point” in DPA discussions is whether certain evidence—including advice from in-house and external lawyers—is shielded by privilege, Graham said. He added that the SFO has signaled that it wants SFO personnel to be the primary investigators in anticorruption probes and would prefer that companies not use external lawyers for internal investigations, and later claim privilege over witness interviews.
“The SFO is saying, we want to get the facts, we should have the primacy of the investigation and your external lawyers must stand back,” Graham said. “This obviously is a dramatic new approach and is one that is causing some consternation, both with companies and lawyers, because the company needs to know the depth of the hole” it is in.
Meanwhile, banks and other firms are facing heightened FCPA and anticorruption risks in trying to access Asian markets, Hong Kong-based Mayer Brown partner John Hickin said.
Among other problems, the diversity of regulatory requirements among Asian countries as well as between the U.S. and Asia makes compliance a challenge, Hickin said. He noted, for example, that what constitutes an acceptable gift varies widely between Asian jurisdictions. There could be “dramatic and subtle differences,” so it's important for companies to tailor their compliance programs to local circumstances.
In addition, companies may find themselves in a “Catch 22” given the fact that U.S. authorities encourage self-reporting, whereas local Asian privacy laws may bar the overseas disclosure of certain documents or information, Hickin continued. Under the circumstances, it is prudent for companies to seek country-specific advice on these issues to avoid potentially harsh sanctions.
Hickin also recommended that companies consider in-country review and limit transfer of electronic material where the situation is not clear.
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