In December 2013, Mexico enacted constitutional amendments lifting restrictions on participation in its hydrocarbons and electrical energy sectors. These reforms end longstanding government monopolies held by Pemex, the state oil company, and the Federal Electricity Commission, which will now compete against private generators to supply public energy demands. This “epoch” change opens both sectors to private and foreign companies, presenting them with tremendous opportunities … as well as significant FCPA and related risks. This post identifies several key factors contributing to these risks.
Rapid Regulatory Change
Mexico’s constitutional changes have to be implemented through legislation, which will determine the outcome of these reforms more than the changes in principle made to date. Mexico’s Congress will need to determine th...Read more
Certain company processes might not constitute traditional notions of “internal controls,” but FCPA enforcement officials have taken the position that a wide range of activities is covered by the term.
For example, in Orthofix, the SEC found that the company failed to maintain adequate internal controls when the company’s FCPA compliance policy and FCPA-related training in Mexico were provided only in English and not in Spanish. In Eli Lilly, the SEC found that the company lacked sufficient controls when it failed to have a due diligence and monitoring process in place to ensure its Brazilian distributors were not paying bribes on its behalf.
Under the FCPA, companies can be punished not only for the wrongful things they do, like paying bribes. They can also be punished for certain things they don’t do. In particular, the FCPA’s accounting provisions require companies to have internal controls in place. When companies do not have certain protections like appropriate accounting systems and anti-corruption policies, procedures, and processes, they risk violating the law.
Specifically, the FCPA’s accounting provisions require issuers (both U.S. and non-U.S. companies that are publicly traded in the United States) to establish and maintain a system of internal controls sufficient to assure that (i) transactions are executed in accordance with management’s authorization; (ii) access to assets is permitted only with the proper authorization; and (iii) the accounting records reflect the existing assets. FCPAméricas overviews...Read more