FCPA Compliance is No Longer Enough Understanding Key Provisions, - - PowerPoint PPT Presentation

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Anti-Corruption Reform in Mexico: FCPA Compliance is No Longer Enough

Understanding Key Provisions, Ensuring Compliance and Mitigating Legal Risks

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific WEDNESDAY, DECEMBER 9, 2015

Matteson Ellis, Member, Miller & Chevalier, Washington, D.C. Diego Sierra, Partner, Von Wobeser & Sierra, México City, México

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Anti-Corruption Reform in Mexico: FCPA Compliance is No Longer Enough

Diego Sierra Partner Von Wobeser & Sierra dsierra@vwys.com.mx Matteson Ellis Member Miller & Chevalier Chartered mellis@milchev.com

Entry to Market in a High-Risk Country

UNITED STATES

RANK

22

COUNTRIES

175

SCORE

74

MEXICO

RANK

103

COUNTRIES

175

SCORE

35

6

Countries of Focus

23 14

13 8 8 7 7 6 6 6 6 6 6 5 5 5 5 3 3 3 3 3 3 3 3

Countries Implicated Most Frequently in Corporate FCPA Enforcement Actions (combined) 2009-2015

7

Companies Subject to FCPA Actions based on Mexico Activities

8

Bribery Risks – Mexico

Statistics from PwC Latam 2000-2015 Anti-Corruption Enforcement Results in Latin America Report and 2015 Mexico Energy Reform Report

85% of cases in Latin America involved third parties 25% of cases in Mexico involved payments through fictitious vendors/invoices 28% of cases in Latin America involved the

• il & gas sector

67% of cases in Mexico involved payments through business partners 25% of cases in Mexico involved gifts, travel and entertainment

9

Mexico’s National Anti-Corruption System (SNA): Key Provisions

10

Coordinated System between Authorities Established New Functions Established for Superior Auditor of the Federation Federal Administrative Court Jurisdiction Created for Anti- Corruption Matters New Rules for Public Official Violations Creation of Local Administrative Justice Courts

Mexico’s SNA: Key Provisions

11

New Monetary Sanctions for Private Parties Corporate Intervention and Dissolution Explicitly Established Public Official Asset and Conflict of Interest Declaration Requirements New Federal Legislative Powers Established Statute of Limitations Extended

Mexico Public Procurement Regulation

• Federal Anti-Corruption Law in Public Procurement

(FALPP)

– Enacted in June 2012 – Responsibilities and sanctions for bribery acts committed in public procurement proceedings – Applies to:

• National and foreign individuals and corporations
• Third parties – agents

– Takes into consideration international standards for compliance best practices

12

Mexico Public Procurement Regulation

• Federal Anti-Corruption Law in Public Procurement

– Anti-bribery provisions – Fines

• Individuals: up to USD $20,000
• Corporations: up to USD $12 million if serious violation or up to

35% of contract price

– Debarment

• Individuals: up to eight years
• Corporations: up to ten years

– Disclosure benefits

13

SNA: Main Distinctions with FCPA

SNA FCPA Subject persons Individuals and corporations Individuals and corporations Scope Foreign and local officials Only foreign officials Prohibited acts Bribery of public officials, as defined by secondary legislation Bribery of “foreign

• fficials,” as defined by Act

Facilitation payments The proposed legislation does not make this distinction Exception for facilitating payments

14

SNA: Main Distinctions with FCPA

SNA FCPA Strict liability Unclear whether it will be contemplated by secondary legislation Anti-Bribery provisions require corrupt intent; Accounting provisions approach strict liability Books and records Unclear whether it will be contemplated by secondary legislation Yes, Accounting provisions cover books and records Corporate liability Yes, corporations can be held liable Yes, corporations can be held liable under respondeat superior Sanctions Established by secondary legislation; under FALPP, up to USD$12 million, up to 10 years debarment Up to USD$2 million per violation (Anti-Bribery provisions); up to USD$25 million (Accounting provisions), plus possible disgorgement of profit

15

SNA: Main Distinctions with FCPA

SNA FCPA Credit for compliance programs May be established by secondary legislation; under FALPP, no explicit credit but possible benefit Not statutorily, but U.S. Sentencing Guidelines provide credit for compliance programs Credit for self-disclosure and cooperation Proposed legislation provides mitigated economic sanctions Not statutorily, but U.S. Sentencing Guidelines provide credit for self- disclosure Indirect liability May be established by secondary legislation; already in FALPP Permits indirect liability for acts of third parties Statute of Limitations 7 years 5 years

16

Main Distinctions with FCPA

SNA FCPA Jurisdiction Individuals and corporations acting in Mexico, including non-Mexican companies registered in Mexico

• U.S. individuals and corporations

worldwide;

• Foreign individuals and

corporations acting within U.S.;

• Companies listed on U.S.

exchanges (U.S. issuers) and their employees acting worldwide; and

• Agents acting on behalf of a

covered individual / corporation Enforcement Administrative and criminal Civil and criminal Negotiated plea agreements Proposed legislation provides that under certain conditions agreements can be entered Corporate settlement agreements are negotiated and entered into regularly

17

Anti-Corruption Enforcement in Mexico: OECD Working Group

18

Findings of OECD Working Group: Follow-Up to Mexico Phase 3 Report & Recommendations (June 2014)

• Has no foreign bribery prosecutions or convictions
• Anti-corruption law does not create corporate liability for

foreign bribery without identification or conviction of relevant individual and without proof that the bribery was commitment with the means of the corporate entity

• Made meaningful updates to MLA procedures
• Begun training prosecutors in anti-corruption techniques

Anti-Corruption Enforcement in Mexico: OECD Working Group

19

Findings of OECD Working Group: Follow-Up to Mexico Phase 3 Report & Recommendations (June 2014)

• Efforts to use FALPP to implement OECD

recommendations unsuccessful

– Does not expressly address jurisdiction to prosecute legal persons incorporated or headquartered in Mexico criminally for extraterritorial foreign bribery – Does not cover some types of foreign bribery – Parallel criminal and administrative enforcement regimes raise questions about coordination – multiple bodies could be involved in investigation of the same case – Questions over whether administrative enforcement body has sufficient enforcement expertise

Enforcement of the SNA: Corporate Intervention

20

Oceanografía Case

PEMEX Off-shore Services Provider USD $585 million fraud Intervened since 02/2014

Enforcement of the SNA: Politicized?

21

Coordination Committee: executive and judicial branches, citizens Investigation bodies balanced by Administrative Justice Courts Attorney General’s Office Anti-Corruption Division balanced by Criminal Courts Attorney General’s Office as independent and autonomous body Checks and Balances

Enforcement of the SNA: International Cooperation

22

Not mentioned in Constitutional Amendment and proposed legislation México’s international

• bligations to cooperate (e.g.,

OECD) Basic rules for international cooperation expected in secondary legislation

Enforcement of the SNA: Whistleblower Provisions

23

Mexican Constitution: Recognizes that anyone can report violations Proposed legislation: Protections and benefits for whistleblowers FALPP: Benefits but no protections

FCPA Compliance Programs: Basic Elements

• Chief Compliance Officer
• Tone at the

top/commitment

• Risk assessment
• Anti-corruption policies

and procedures

• Communication/trainings
• Internal controls
• Specific procedures for

gifts, travel, hospitality, charitable contributions

• Third party due diligence
• Discipline/incentives
• Hotlines/internal

investigations

• Internal investigations
• Compliance audits

24

Compliance in Mexico: Public Official Guidelines for Public Procurement

• Guidelines for dealing with private parties in public

procurement meetings

• Meetings and telephone conversations recorded
• Contacts made in writing
• Meeting in public offices
• Meeting minutes

25

Best Practices for Compliance: Compliance Programs under the SNA

26

FCPA training not enough Explicit credit for compliance programs not expected Compliance programs could be used as to argue for mitigated treatment Compliance programs should meet international standards FALPP contemplates compliance programs – no express benefit

Modification of FCPA Compliance Programs in Consideration of SNA

27

Modifications to consider:

• Understand new legal requirements places on local

Mexican officials (conflict of interest, disclosure, etc.) and structure compliance analyses accordingly

• Extended statute of limitations modifies recordkeeping

requirements

• Compliance trainings focused on FCPA and Mexican laws
• Internal investigations considering conduct that violates

new Mexican laws

• New voluntary disclosure considerations, given multiple

authorities with jurisdiction and interest

• New whistleblower considerations