In a recent client alert, we explored the U.S. Department of Justice’s (“DOJ”) June 2020 update to its guidance on Evaluation of Corporate Compliance Programs (the “DOJ Guidance”).
In this series of posts, our Africa Anti-Corruption Practice will be focusing on the key takeaways from the DOJ Guidance through the lens of companies operating in Africa, starting with a foundational question: Why does guidance issued by U.S. law enforcement authorities matter to companies operating in Africa?
Strictly speaking, the DOJ Guidance does not “require” anything of companies, regardless of where they are headquartered, incorporated, or operate. Even for U.S. companies, the DOJ Guidance is not a prescriptive regulation with the force of law. Rather, it is a guidance document that is “meant to assist [U.S.] prosecutors in making informed decisions as to whether, and to what extent, [a] corporation’s compliance program was effective at the time of [an] offense, and is effective at the time of a charging decision or resolution.” This evaluation by prosecutors can impact various aspects of a DOJ enforcement action, including the form of resolution (e.g., guilty plea vs. deferred prosecution agreement), the monetary penalty imposed, and other compliance-related obligations imposed in a settlement (e.g., self-reporting requirements or independent compliance monitorships).
Although the DOJ Guidance is on the surface intended as guidance for prosecutors, DOJ is undoubtedly speaking to a corporate audience as well. By providing the framework under which U.S. prosecutors evaluate compliance programs, the DOJ Guidance provides an “answer key” of sorts, allowing companies to test the effectiveness of their compliance programs before they come under the scrutiny of prosecutors.
For companies operating in Africa that have the most significant exposure to U.S. law (e.g., affiliates or partners of U.S.-headquartered or U.S.-listed companies), the reasons for heeding the DOJ Guidance are obvious – the DOJ Guidance will provide the “rules of the game” in the event that the company finds itself defending its compliance program before DOJ.
For companies with less meaningful ties to the U.S., which may face less significant risks of prosecution under U.S. law, the DOJ Guidance is still highly relevant for several reasons:
1 — The DOJ Guidance Reflects International Best Practice and Provides a Useful Evaluative Framework for Compliance Programs
The DOJ Guidance is by no means the only guidance that companies should consider in designing, implementing, and evaluating their compliance programs, and companies are well served by considering other sources of guidance that may be relevant to their programs. That said, the DOJ Guidance is largely reflective of emerging international best practice, regardless of the particular legal exposure that a company operating in Africa may face. Indeed, many other sources of compliance program guidance echo best practice that U.S. authorities have articulated and refined over the past several years based on their experience investigating and prosecuting hundreds of foreign bribery and other economic crime cases.
We have also found the DOJ Guidance to be among the most detailed and user-friendly sources of guidance in this area, particularly when read together with enforcement precedents. By focusing on three pillars: (1) program design; (2) implementation, resourcing, and empowerment; and (3) practical effectiveness, the DOJ Guidance provides a useful evaluative framework that should help companies better organize program assessment and enhancement exercises, and explain those steps to business stakeholders. We have found that the DOJ Guidance can be fairly easily translated into a series of questions in different program areas to enable a program assessment.
2 — The DOJ Guidance May Provide the Standards by Which A Company’s Program is Judged by Business Partners and Other Stakeholders
As we have previously discussed in a post outlining the business case for investing in compliance programs, separate from satisfying the expectations of enforcement authorities, having an effective compliance program that meets international standards can help to drive commercial success, including by giving companies a competitive advantage in interactions with key stakeholders such as customers, business partners, and investors. That is particularly true where such stakeholders are themselves subject to U.S. law and have mature compliance programs built around U.S. standards.
In the procurement context, for example, many of our clients evaluate the strength of their suppliers’ compliance programs alongside traditional commercial criteria such as price and quality of services. In addition, lenders and investors are increasingly factoring compliance considerations into their decision-making processes. Finally, in an environment where issues such as sustainability and human rights are driving consumer and employee choices, companies should be prepared for integrity issues to become increasingly relevant to consumers and employees, who may “vote with their feet” if they are unsatisfied with a company’s commitment to compliance. Being able to demonstrate that a company has a compliance program consistent with the DOJ Guidance can often go some way in satisfying such stakeholders.
3 — The Reach of U.S. Law and Increasing Enforcement Activity in Europe and Africa
Finally, given the potential reach of U.S. law (which in some circumstances can be triggered by fleeting connections to the U.S., such as correspondent bank transactions flowing through U.S. financial institutions), it is difficult for a company operating in Africa to completely insulate itself from exposure to violations of U.S. law. In the event that a company finds itself in a DOJ investigation, its compliance program will be judged by the standards set forth in the DOJ Guidance regardless of whether the company is headquartered, incorporated, or listed in the United States.
Along similar lines, with increasing enforcement activity by authorities in Europe and Africa, a company that builds its compliance program around the DOJ Guidance and similar sources of international best practice guidance will be better positioned to engage with such authorities.