Asian Companies Playing with FCPA Enforcement Fire

In the midst of all this hullabaloo about the FCPA Guidance, an important survey was recently released by Kroll which confirmed my worst fears – despite all of the enforcement actions, all of the FCPA Paparazzi fear mongering, the implementation of the UK Bribery Act, and the global anti-corruption movement, Asian companies are not implementing anti-corruption compliance programs.  In the words of John McEnroe, “You have got to be kidding!”

The Kroll survey found that less than half of Asian countries had even assessed their business operations for risks of an FCPA anti-corruption enforcement action.  (It is hard to make the case for a risk assessment of the UK Bribery Act given the twists and turns of the SFO and its enforcement capabilities).  A large percentage of Asian businesses surveyed in the Kroll report acknowledged that their internal controls were insufficient to respond to such risks.

Compounding this problem is the fact that Asian companies rarely, if ever, know how to handle whistleblower allegations or any allegation of impropriety.  Several significant enforcement inquiries started from whistleblower allegations lodged by Asian employees who contacted United States enforcement agencies.  This phenomena demonstrates that risks for Asian companies is rising and confirms a growing trend – Asian companies are likely to fall under FCPA enforcement.  For FCPA prosecutors, this will be like shooting fish in a barrel.

All of this is amazing to me, especially in light of the fact that at least one-third to slightly less than half of all FCPA enforcement actions involves corruption in Asia, especially China.  How is it that Asian companies can ignore such a significant risk?

Japanese companies have fallen under the FCPA hammer – in 2011 and 2012.  JGC and Marubeni settled significant FCPA enforcement actions.

In addition to anti-corruption risks, Japanese companies are often the focus of antitrust enforcement, especially criminal enforcement in the United States.  One of the more significant criminal antitrust actions involved global auto parts enforcement, leading to several large settlements and individual prosecutions. 

Some have suggested that Asian businesses have corporate cultures which are years behind in ethical values.  Others have argued that Asian companies deliberately ignore compliance as a “wasted” effort and cost center.  Competition can be a cut-throat business and cost reduction can sometimes lead to compliance ignorance. 

These criticisms ignore the obvious ability of Asian companies to organize and implement effective compliance programs as part of an overall business strategy. 

Whatever the explanation for compliance deficiencies, the dangers are very clear – Asian companies need to take a deep breath, devote more resources to corporate governance and allocate time and attention to compliance, with an obvious focus on anti-corruption (and antitrust).  

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4 Responses

  1. Jon May says:


    Not going to happen. Not for at least a generation. Until you have truly democratic governments and full transparency, our laws will just be seen as our foreign policy. So long as there is  no committment to free markets, the Asians (with the exception of Singapore–I know that runs counter to what I have just said) are happy to just let us just enforce our laws against the few we can catch. After all, what's a handful of prosecutions in a trillion dollar industry. Unless we want to keep companies from doing business with the U.S. and end up in international trade disputes, nothing is going to change with these companies. It is what it is. 


  2. RS says:


    Dear Mike:

    This is a confusing post.  You sarcastically as usual refer to FCPA Paparazzi (as you do in every post you write) and say they are engaged in "fear mongering" (presumably meaning spreading false or unnecessary fears about compliance issues).  Fine so far, that's certainly a positon one can take.  But then the rest of the post is dedicated to your amazement that Asian enforcement practices are bad and you cite to the "important" Kroll study.  

    Based on your past psots, I've always assumed Kroll is part of the FCPA Paparazzi, and I suppose what they are doing is "fear mongering" by raising their concerns about enforcement practices which is in their pecuinary interest as a global compliance and investigation firm.  But then you seem to be completely supportive of their conclusions and fear-mongering.  

    At this point, I am pretty sure you don't know what you mean by FCPA Paparazzi, except that it refers to everyone but you and your firm or friends, whom you naturally see as only giving sage FCPA advice out of the goodness of your hearts and not for profit.  Or, perhaps you too are part of the paparazzi?  That's what I have always assumed.  

    • Michael Volkov says:

      Thanks RS for your comment.  The Kroll study is “important” and more reliable because it is based on a survey of Asian company executives.  The FCPA Paparazzi refers to those who write on anti-corruption issues without a careful evaluation of the facts and an assessment of the risks.  There are a number of attorneys, consultants, and others who make valuable contributions to FCPA scholarship, trends and legal/business analysis.  I may not agree with everyone that writes on the subject but I do not respect those who try to exaggerate risks in an attempt to strike fear in the hearts of business executives.  The business community appreciates candid advice.  Those who do not provide such advice in an attempt to increase thier own revenues are the essence of the FCPA Paparazzi. 

  1. December 7, 2012

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