Covid-19 has created a perfect storm for regulatory lapses and failures: an unprecedented combination of business and regulatory disruption in a condensed time of period. Compliance requirements and safeguards are ignored, and compliance investigations hindered, delayed, or canceled. But do not expect the Department of Justice or the Securities and the Exchange Commission(“SEC”) to relax enforcement of the U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”) during the Covid-19 pandemic.
The FCPA makes it unlawful for an “American” (defined broadly and counterintuitively) business or individual representing to offer, promise to pay or authorize another individual, e.g. agent, lawyer, etc., to pay money or anything of values for purposes of gaining a business advantage or maintain commercial interests. The FCPA does not specifically use the word “bribery”, but bribery is covered by its provisions. The FCPA also requires publicly traded companies on U.S. exchanges to “make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer.” The statute has criminal and civil components; the DOJ is responsible for criminal enforcement of the FCPA and civil enforcement of its bribery provisions, and the SEC is responsible for civil enforcement of the FCPA’s “books and records” provisions if securities are involved. The DOJ and SEC rarely enforced the FCPA in its first three decades of existence in 1977 following the Watergate scandals. These agencies, however, have aggressively interpreted and enforced the law since 2000 (around the time of 9/11). From 2000 to 2019, the DOJ brought 235 enforcement actions and the SEC brought 168 enforcement actions, together involving over $11 billion in monetary resolutions.
There has been no sign that the DOJ or SEC will ease enforcement of the FCPA. Indeed, all signs have been quite the opposite. Thailand fares poorly on corruption surveys. Transactions involving Americans operating in Thailand have been examined for compliance with the FCPA and in, some cases, resulted in fines and imprisonment for FCPA violations.
During the Covid-19 pandemic supply lines have been stretched thin. Sales personnel that set their objectives before the pandemic set in are under tremendous pressure to meet objectives that are now often unrealistic. The demand for essential goods is high. As of the date of this article (30 May 2020), Thailand restricts foreigners from entering Thailand unless they are working for a governmental agency (e.g., diplomatic personnel) or have a valid Thai work permit. Sale personnel with regional responsibilities, common in Southeast Asia, rarely have Thai work permits.
Compliance lawyers and officers face a similar, and greater, challenge. A telephonic compliance interview is weak tea compared to an in-person interview. There is no substitute to being there in heterogenous Asia. Even before the pandemic, foreign compliance personnel were skating on thin ice when they flew into Thailand for a few days to conduct a compliance interview. Conducting a compliance interview is a form of work, and when foreigners work in Thailand they must – with a few exceptions not applicable here – have a work permit There are short term permits available for short term work in Thailand, but not this type of work. Working without a work permit is a criminal offense. And this form of work can quickly turn contentious if local personnel realize that they may be terminated or worse for their activities.
written by Douglas D. Mancill