On August 14, 2020, the U.S. Department of Justice (“DOJ”) issued Opinion Procedure Release 20-01, its first FCPA Opinion since 2014. The DOJ opinion states that, based on the facts and representations provided by the requesting party, a payment to a foreign state-owned investment bank for legitimate services would not trigger an enforcement action.
The DOJ FCPA Opinion procedures allow companies to obtain an opinion from the Attorney General as to whether certain specified, prospective, and not hypothetical conduct conforms to DOJ’s present enforcement policy. Although FCPA Opinions do not expressly apply to parties that do not join the request for the opinion, they are broadly used to understand the Department’s present enforcement policies. This opinion was originally requested in November 2019, so the response did not come for nine months and after multiple requests for additional information.
According to this most recent Opinion, an unidentified multinational investment advisor headquartered in the U.S. which manages private funds serving institutional investors, acquired a portfolio of assets from a foreign investment bank’s foreign subsidiary (“Country A Office”). As part of that transaction, a separate foreign subsidiary of the investment bank (“Country B Office”) provided services to the U.S. investment advisor related to the transaction. Country B Office then requested a payment of $237,500 from the investment advisor for those services. A foreign government controls a majority of the foreign investment bank (and therefore both Country A Office and Country B Office).
The DOJ stated that it does not presently intend to take enforcement action for the payment to Country B Office based on two primary reasons. First, based on the information and representations provided by the investment advisor, there was no evidence of corrupt intent. Indeed, Country B Office’s Compliance Officer certified that the payment was commensurate with the services provided and is commercially reasonable.
Second, the DOJ opined that the payment would be made to a government instrumentality, not a foreign official. To this point as well, the Compliance Officer of Country B Office certified that the payment would be made to Country B Office’s corporate bank account, would not be used or forwarded to any other entity, and would not be diverted to any individual.
Conclusion and Takeaway
These points are good reminders that while the FCPA prohibits corrupt payments to foreign officials to assist in obtaining or retaining business, it is not a blanket prohibition of all payments to foreign governments or foreign government instrumentalities.
One takeaway from the August Opinion is the DOJ’s emphasis on the certification of the Compliance Officer of Country B Office. This demonstrates that the investment advisor who made the request was performing fulsome due diligence related to the payment request. This type of due diligence is critical for any company making payments to entities owned or controlled by foreign governments.
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