A united compliance approach

Jan. 1, 2020
Companies that operate abroad are aware that the U.S. government increasingly is focusing on laws that govern extra-territorial conduct by U.S.-based multinational corporations.

Companies that operate abroad are aware that the U.S. government increasingly is focusing on laws that govern extra-territorial conduct by U.S.-based multinational corporations. This trend of increasing exposure to multiple regulations should raise concerns at all U.S.-based aftermarket companies that operate abroad because the U.S. government is looking at these laws in an integrated fashion that multiplies the risks for multinational corporations. With the government taking a more global view of the Foreign Corrupt Practices Act (FCPA), and the export controls, economic sanctions and anti-boycott regulations, multinational aftermarket exporters also need to be taking an integrated approach to compliance. Handling all international areas together has a number of compliance advantages, including:

  • ν Common procedures. Employees are busy, and compliance usually is not their primary focus. Creating one set of procedures is advantageous from implementation, training and operational standpoints.
  • Cross-fertilization. Integrating compliance reveals cross-trends, for example, FCPA controls for government officials can reveal illicit contracts; know-your-customer guidelines can reveal FCPA risk areas, and so forth.
  • Implementing best practices. An integrated approach allows for the implementation of best practices quickly across an entire organization.
  • Ease of auditing. The growing trend is for companies to perform periodic audits to confirm that well-conceived programs are being followed on the ground and to nip small problems before they become systemic. An integrated approach leverages audit capabilities across compliance areas.
  • Increased visibility for compliance. Traditional problems of getting companies and employees to take compliance seriously, and not just to treat it as a cost and distraction from making sales, are naturally combated by creating a centralized and higher-visibility compliance function.
  • Ease of board-level monitoring. Compliance needs to jostle with strategic concerns for board-level attention. Integrated compliance allows for the systematic presentation of compliance-related information to the board of directors, surely a strong consideration with Sarbanes-Oxley increasing the requirements of board-level monitoring.
  • Viewing compliance and risks as the U.S. government does. Although the U.S. government splits enforcement authority between multiple agencies, when problems arise, the government brings together the regulators in joint indictments and settlement discussions that cover multiple problems. It is a definite advantage to be identifying risk and engaging in risk mitigation in the same way that the government does.

Similarly, taking a integrated approach to compliance across geographic regions also has a number of advantages, including:

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  • ν Ease of monitoring. Compliance takes detailed knowledge of the relevant regulations and a firm understanding of how to apply them to myriad fact patterns. Application of one standard facilitates the development of expertise in the application of the compliance standards.
  • Ease of implementing. Implementing a single standard, or one with only a few, planned-out variations, is easier to do on a multi-country basis.
  • Dealing with workforce mobility. In many multinational aftermarket corporations, people frequently move from division to division and from country to country. Differing compliance standards multiply confusion as the rules change at every stop.
  • Centralization. Since many of the most stringent regulations originate in the United States, their nuances often are best understood by U.S. counsel or compliance staffs. Having consistent, well thought out standards facilitates oversight by these compliance personnel.
  • Dealing with extraterritoriality. The U.S. government has become increasingly aggressive in enforcing U.S. laws against foreign interests, even in situations where it formerly declined to do so. With the government reaching farther afield, setting standards that do not comply with U.S. norms becomes an increasingly risky strategy that should not be implemented without careful thought.
  • Standards convergence. In some areas, such as the FCPA and economic sanctions, U.S.-style prohibitions are being adopted by other countries. This increases the value of taking a coordinated approach across jurisdiction, divisions and subsidiaries.
  • Facilitation standards and U.S. citizens. Even in situations where the U.S. government does not impose U.S. standards on foreign subsidiaries, it often imposes liability on U.S. persons involved in the transaction, including through the application of agency principles, prohibitions on U.S. person involvement in the transaction and application of rules forbidding facilitation or aiding and abetting regulated conduct. Maintaining different standards across divisions and countries multiplies the compliance burden of screening covered U.S. nationals from these types of transactions.

With the U.S. government sharply increasing its enforcement efforts, now is a good time for multinational aftermarket exporters to consider the advantages of taking a unified, institution-wide compliance approach that covers the gamut of regulations that expose the organization to these regulatory risks. In the next ten articles in this series, I will provide concrete compliance advice regarding the laws and regulations most commonly encountered by aftermarket exporters operating or selling abroad – the FCPA, export controls, economic sanctions and anti-boycott regulations.

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