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How to investigate a non-compliance against Foreign Corrupt Practices Act (FCPA)

As our world becomes increasingly globalized, international crime and fraud can become harder and harder to stop. At the same time, it has become more and more important for governments, investigators and law enforcement agencies to work together to stop crime and fraud, especially on a large scale scope. One important arena in which this must occur is pertaining to things covered in the Foreign Corrupt Practices Act (FCPA), a federal law of the United States, and other similar laws in other countries.

The FCPA covers two main aspects. The first is prohibiting the payment of bribes to foreign officials to assist in obtaining business. This seeks to ensure a fair, competitive market for international business. The second area covered by the FCPA is that businesses are required to maintain accurate and transparent records. This covers things such as insider trading and falsifying trade records or business reports.

While the FCPA has a wide reach, because the law applies to both American businesses and to foreign corporations trading securities in the United States, it obviously does not apply to every situation. Because of this, various laws have been passed in most developed countries banning bribery and requiring the maintaining of accurate records.

Despite these laws, bribery and fraudulent record-keeping still exists. One extremely prominent example of this was in the case of German engineering company Siemens. In 2005, Siemens began being investigated for bribing international officials in order to win various business contracts. In 2008 they settled with German and American government prosecutors, agreeing to pay $1.6 billion in fines. Siemens relied heavily on bribery for years leading up to the investigation into their practices, spending an estimated $1.4 billion on bribes from 2001-2007. The story of Siemens can be used to illustrate several important aspects of investigations pertaining to the FCPA and other similar laws.

The Siemens model of bribery began to fall apart when investigators in various countries began to investigate suspicious transactions pertaining to Siemens. These suspicious transactions raised red flags in various countries, and investigators began following the trails back to Siemens, an important aspect of any investigation involving financial crime or fraud. As this occurred, officials in several countries, including Italy and Switzerland, began collaborating with German officials. This willingness to work together does not always occur in international cases, but the success in this case shows the value of various law enforcement agencies working together against crime. By working together, these investigators were able to find a wide trail of bribery.

Another important aspect of this investigation was finding insiders who were willing to cooperate with prosecutors, including the yielding of evidence and payment records. This speaks to the value of gaining access to people involved in the crime who can testify, providing information not readily accessible, and enabling investigations to proceed smoothly.

As the investigation progressed, a huge amount of time and effort was put into working through records obtained from Siemens in order to fully ascertain the scope of the bribery and to determine who was at fault. While many cases would not involve the massive scale of records involved in this case, a thorough, precise and careful assessment of the available records must occur in order to ensure the fraudulent parties are able to be prosecuted.

While the Siemens case is an example of international bribery, another famous case violating the other half of the FCPA was the recent case of the Bank of Rajasthan. Located in India, the bank was part of a recent scandal and criminal prosecution for illegal trade practices. From 2007 to 2009, the shareholding promoters of the Bank of Rajasthan claimed their stake had dropped from roughly 45% to   under 29%; in reality they had, though the active collusion of other entities, increased their stake to roughly 63%. This violated Indian laws, as the increased shares were not publicly stated. Severe fines were levied against the individuals who had engaged in fraudulent reporting.

This shows another example of nations fighting against corrupt business practice. This fight is something that has become more and more prevalent in recent years, and must continue to grow. Criminals and fraudulent dealings within businesses are far too common. But through enforcement of laws and strong investigations into the violations of those laws, illegitimate dealings of these types can be minimized.

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