Enforcement of International Corruption Laws Strengthens in Asia

21 January 2011

With the rigorous new Bribery Act coming into force in the UK in April and the ramping up of enforcement of the United States’ Foreign and Corrupt Practices Act (FCPA), multinational firms doing business in Asia must put new and tougher compliance norms into place.

Firms looking to Asia for new business opportunities are taking more care to investigate potential projects before stepping into agreements for new joint ventures, mergers or acquisitions.

It is well known that navigating and trying to avoid the long established channels of corruption to do business in Asia can be difficult. Many Asian countries such as China, India, Indonesia and Vietnam are ranked very high on a table created by Transparency International to rank the least corrupt countries.

In 2010, a record number of cases were brought under the United States’ FCPA, which deems payment of bribes to foreign officials illegal. Alcatel Lucent is the most recent large corporation to become snared by the FCPA, and agreed to pay $137 million to settle bribery charges last year, levied against it for paying bribes to officials in several Latin American and Asian countries.

More law firms are now opening new offices in Asian countries, to specialize solely in U.S. litigation. One such firm in Hong Kong was opened by Kobre & Kim, to provide services to clients concerned about the marketplace in Asia. This firm often receives cases from U.S. firms that become entangled in bribery or gift-giving while trying to gain a competitive foothold in the market.

U.S. government prosecutors have shown that U.S. companies operating in Asian countries such as China should still follow U.S. standards, even if they must push back against Chinese business norms.

The United States’ Securities and Exchange Commission also recently opened up a new FCPA enforcement office in San Francisco that will specialize in Asia and California.

Bribery Act in the UK

The UK’s new Bribery Act will come into force in April, and has been deemed “the FCPA on steroids”.  This new rule will apply to any company that has offices in Britain, even if the majority of its business is done elsewhere.

This new act brings some stricter enforcement to the table, including the prohibition of bribe payments between private businessmen and payments for facilitation. This could include grandiose examples of corporate hospitality, which are likely to come to attention under this Act.

Many companies that have operated in Asia for many years are now facing the need to review their control procedures with the coming implementation of this law, as the Bribery Act will be very far-reaching.

In the past, enforcing these types of laws in Asia was extremely difficult.  However, recent developments have paved the way for lawyers to see more cases involving the FCPA regulations to come in.

The Dodd Frank Act, signed into law by President Obama in July of 2010, contains whistleblower provisions that encourage people to report any breaches of the FCPA in order to receive between 10 to 30 percent of any penalty worth over $1 million. The provisions have provided incentives for an individual to become a whistleblower. The amount of money an individual could receive by blowing the whistle on any infringements is quite substantial, especially if they live in a country in Asia.

The amount that could potentially be received in cases such as this might be more than a worker in China or India can ever dream of receiving throughout their entire lifetime.

Asian governments, especially China, are making more efforts to clamp down on corruption and bribery.