In an environment where corporate compliance protocols are under the microscope, two recent actions under the Foreign Corrupt Practices Act (FCPA) spotlight the diligence required by legal and compliance departments, especially when it comes to reimbursing travel and hospitality-related expenses. These actions – a Department of Justice (DOJ) opinion letter and a Securities and Exchange Commission (SEC) settlement – offer valuable insights for law firms and corporations worldwide.
First, in a DOJ opinion letter, the Department considered a multinational corporation’s request to pay for certain travel and hospitality expenses for foreign government officials attending a product demonstration overseas. The DOJ’s letter not only approved the request under certain conditions but also provides a roadmap for legals and compliance departments to handle similar situations. The conditions include fact-specific limitations and adequate compliance safeguards to reduce the risk of corruption. For example, the corporation can’t select the officials, they can only reimburse costs directly incurred as a result of the visit and the expenses must be of a reasonable value.
Second, the SEC reached a settlement with a company after alleging that it violated the FCPA by failing to implement adequate internal controls around travel, hospitality, and entertainment expenses provided to foreign officials. The SEC’s press release shed light on how the lack of appropriate internal controls can lead to violations of the FCPA, reinforcing the need for comprehensive compliance programs. The settlement included a financial penalty and an agreement by the company to strengthen its compliance protocols.
In conclusion, both recent actions illuminate the fact that while Vietnamized expenses can be legitimate, they need to be handled with care. Specifically, they need to be adequately and clearly documented, demonstrably related to business, and reasonably valued. Noncompliance could potentially expose companies to significant penalties and reputational damage.Learn more about recent FCPA actions and their implications on handling travel and hospitality-related expenses.
The key takeaways from these developments are:
- Place and maintain effective controls over travel and hospitality expenses, especially expenses related to foreign officials.
- Ensure to document all expenses and maintain a clear link between the outlay and the business purpose.
- Promptly investigate any red flags or allegations of violations, and take corrective actions when necessary.
In the face of mounting regulatory scrutiny and enforcement, companies must stay vigilant and proactively manage their FCPA risks, particularly with respect to travel and hospitality expenses.