TRACE Report on 2019 Anti-Corruption

At long last, we have some non-Covid news for the ethics and compliance world. TRACE International just published its report of global anti-corruption enforcement in 2019, showing a “relatively slow year for enforcement” but nothing far outside the normal, slow-rolling patterns of government investigations.

As usual, the majority of anti-corruption enforcement actions conducted last year were led by the United States: 17 enforcement actions, compared to only 6 for the rest of the world. Both numbers are lower than those of 2018, but not really out of range when you look at the historical averages. See nifty chart, below. 

 

Those 17 cases include Justice Department and SEC cases, and TRACE counts cases against a company and its executives personally as one single action. The figures don’t include declinations to prosecute from the Justice Department. Take that as you will, although some will make the argument that a declination to prosecute, along with disgorgement of profits and compliance program reforms, still counts for something. 

A few other key findings from the TRACE report:

• Companies in the extractive industries faced the most U.S. investigations in 2019. There was also an increase in U.S. investigations into bribery of foreign officials in the aerospace, defense and security industries — and as usual, financial services was also high up the priority list.
• In non-U.S. investigations, extractives remained the most investigated industry, followed by engineering/construction and aerospace/defense/security.
• As of the end of 2019, Brazil was conducting the most investigations concerning alleged bribery of domestic officials by foreign companies, followed by India and China. 

None of that should be terribly surprising. Compliance professionals might want to dwell on the international dimension to this issue, since foreign governments investigating domestic bribery within their jurisdictions could be a harbinger of your own government investigating what is, to them, foreign bribery. 

Another Anti-Corruption View

We should also remember that according to other calculations, 2019 looked much busier for FCPA enforcement than TRACE’s view of things.

For example, law firm Gibson Dunn’s annual FCPA review counted 54 actions for 2019, busting out cases against individuals and companies separately. It also noted numerous “FCPA-related” enforcement actions such as money-laundering and wire fraud, which don’t fall within the FCPA statute per se but are usually close cousins to whatever bribery scam is going on.

Then there were FCPA fines and penalties for 2019, which hit an all-time record of $2.6 billion in 2019 — mostly due to two gigantic penalties levied against Mobile TeleSystems in March and Ericsson in December. Without those two cases spiking the curve, last year’s penalties were ho-hum.

My point being: we will always hear numerous interpretations of FCPA enforcement, some making the Justice Department look good, others making it look hands-off. 

For compliance officers, I’ve tended to focus on this for the last two years: continued enforcement, with penalties, by the Securities and Exchange Commission, even when the Justice Department declines to prosecute. Those SEC enforcement actions (we saw one just a few weeks ago with Cardinal Health) always seem to suggest slippery problems to grasp, around control of financial processes and subsidiaries’ actions. 

Lord knows how anti-corruption enforcement will unfold in 2020 with Covid-19 turning the world upside-down. Sooner or later, however, enforcement will continue. Let’s see what the statistics say then.