Alert: "Key Considerations in the Timing of FCPA Violation Disclosures"
In November 2019, the U.S. Department of Justice (“DOJ”) issued revisions to the Foreign Corrupt Practices Act (“FCPA”) Corporate Enforcement Policy (“Policy”). The Policy, which was first introduced in 2016, offers cooperation credit to companies in the form of a presumption of declination absent aggravating circumstances and a reduction of sentencing if criminal resolution is warranted. To obtain the cooperation credit, companies must voluntarily self-disclose misconduct in FCPA matters, fully cooperate, and timely and appropriately remediate in accordance with the standards of the Policy.
The following changes further encourage companies to make voluntary disclosures early in the investigative process in exchange for the cooperation credit.
- First, the Policy now requires companies to disclose “all relevant facts known to it at the time of the disclosure.” The prior version of the Policy omitted the temporal limitation (time of disclosure). As the DOJ explains in the Policy, this change recognizes that the company may not know all relevant facts at the outset of an investigation. In such situations, the Policy instructs companies to make clear that they are making disclosures based upon a preliminary investigation or assessment of information.
- Second, the Policy now states that companies must disclose facts “as to any individuals substantially involved in or responsible for the misconduct at issue.” The prior iteration required disclosure of “all relevant facts about all individuals substantially involved in or responsible for the violation of law.” Like the first revision, this change further incentivizes early voluntary disclosure by removing any perceived requirement that companies must assess whether a violation of law in fact occurred prior to self-reporting.
- Third, the DOJ relaxed the knowledge threshold for cooperation credit by now requiring companies only to report evidence of misconduct of which they are actually aware. Under the previous version, “where the company was or should have been aware of relevant evidence outside of its possession,” the company was required to identify the evidence to the DOJ. By removing the constructive knowledge requirement, this revision makes it easier for companies to comply with the Policy and obtain cooperation credit.
Though relatively subtle, these changes encourage earlier reporting by eliminating some of the potential risk companies faced under the former Policy when electing to self-disclose potential violations of the FCPA. Despite this relaxation of the Policy’s requirements, however, a company’s decision to self-disclose violations to the DOJ is a serious one that should only be made after an in-depth evaluation of a number of factors and in consultation with counsel.