Deloitte Poll: Less Than One-Third of Companies Are Increasing Internal Controls...

Deloitte Poll: Less Than One-Third of Companies Are Increasing Internal
Controls to Prevent FCPA Violations
As Federal Fines and Penalties Rise, Companies Still Need to Crack Down on
Bribes Paid to Government Officials

NEW YORK, April 17 /PRNewswire/ -- While hundreds of millions in fines and
dozens of executives have been charged with Foreign Corrupt Practices Act
(FCPA) violations, less than one-third (32 percent) of respondents to a
Deloitte online poll reported that their companies are increasing internal
controls to prevent such violations.
"FCPA prosecutions have increased dramatically in recent years, and all
indications are that this trend will continue," said Ed Rial, leader of
Deloitte's Foreign Corrupt Practices Act Consulting practice. "The Department
of Justice and Securities and Exchange Commission have repeatedly identified
the FCPA as an enforcement priority and have added staff dedicated to the
investigation of suspected violations. As more U.S. companies seek to expand
into developing foreign markets -- many of which have spotty reputations for
corruption -- the need for effective anti-corruption programs and controls to
prevent and detect potential violations is critical."
The FCPA makes it a federal criminal offense for any company or individual
doing business in the U.S. to offer, pay or authorize a bribe to a foreign
government official to gain some form of business advantage.
Companies are particularly vulnerable when acquiring or partnering with
foreign firms. "Traditional due diligence isn't always enough to uncover FCPA
violations made by potential business partners or transaction targets," said
Wendy Schmidt, national leader of Deloitte's Business Intelligence Services
practice. "FCPA due diligence needs to be focused on determining if a given
subject is a foreign government entity or person, or is associated with a
government entity or person. Research then needs to be conducted for adverse
information, such as allegations of bribery, corruption or criminal activity.
Thorough searches of available public records, including native language media
and internet searches, as well as inquiries with knowledgeable industry and
other sources, are critical."
The areas where respondents believed FCPA violations were most likely to
arise were in agent/consulting relationships (30.3 percent), foreign
subsidiaries of U.S. companies (28.4 percent) and joint venture or strategic
alliance partnerships (21.8 percent).
Nearly one-third (32.8 percent) of respondents indicated that their
primary source of information in assessing vulnerability to potential
violations was typically company sources as opposed to using external sources
such as corruption indexes, media and government reports and third party
vendors.
"In-house compliance, legal and audit teams rarely have the resources and
language capabilities to conduct comprehensive due diligence on people and
entities throughout the world," continued Schmidt. "These same teams have a
tremendous burden of risk thrust upon them as executives and boards push for
more--and better--preventative measures."
Rial continued, "FCPA due diligence requires a top down risk assessment,
taking into account the target's business, countries of operation, foreign
government sales, other interactions with government officials,
anti-corruption program and policies, prior compliance issues and its use of
agents, consultants and other third-party intermediaries. Depending on the
results of this assessment, targeted transaction testing may be required in
certain accounts to determine whether suspicious payments may have been made
directly or through third parties."
Leading practices Deloitte recommends to help prevent and detect FCPA
violations include:
-- Find out where payments are going. Payments are typically routed
through third parties or "front" organizations created by the funds'
ultimate recipients.

-- Be wary of acquisition or partnership targets that do not have
effective anti-corruption compliance programs. Even if the target is
not subject to the FCPA, anti-corruption programs are staples of good
corporate governance and a strong ethical culture.

-- Don't rely on off-the-shelf FCPA products alone. Multi-national
companies may benefit from a tailored system to identify areas of risk
and monitor them through consistent testing of controls and procedures.

-- Don't assume that some industries are safer than others. While the
defense and energy industries have a higher perceived risk of
corruption, cases have been brought against companies in all sectors.

More than 620 executives from the financial services, telecommunications
and manufacturing industries responded to the polling questions during the
webcast, which was titled "Foreign Corrupt Practices Act: Why Heightened
Vigilance Can Be Critical."
About Deloitte
As used in this document, "Deloitte" means Deloitte Financial Advisory
Services, a subsidiary of Deloitte LLP. Please see www.deloitte.com/about for
a detailed description of the legal structure of Deloitte LLP and its
subsidiaries.
SOURCE Deloitte LLP

Lauren Mistretta, Public Relations, Deloitte, +1-312-486-4259,
lmistretta@deloitte.com; Shelley Pfaendler, Vice President, KCSA Strategic
Communications, +1-212-896-1248, spfaendler@kcsa.com