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Trump card in compliance

Posted on 20th January 2017

Are we about to undergo a fundamental sea change in how to approach anti corrupt practices with arrival of President Trump?

As indicated in Bribery: A Compliance Handbook the inspiration for the Bribery Act is often seen to be the Foreign Corrupt Practices Act in the US. The sense that the UK is seeking to follow the US in how it tackles financial crime was only heightened by the introduction of Deferred Prosecution Agreements.

Leaving aside the mimicry of UK policy makers, what happens in the US has the effect of affecting international organisations, including in the UK. (see Chapter 2 of Bribery: A Compliance Handbook). The extra jurisdictional reach of the US authorities, its longer history of enforcement, combined with the resources allocated to and willingness shown by prosecuting authorities, have made life uncomfortable for many multi-national organisations – just ask BAE or FIFA.

However, does Donald Trump’s nomination of Wall Street Lawyer, Jay Clayton to head the Securities and Exchange Commission (SEC) signify a sea change.

The SEC is the US’s top financial regulator and it will be headed by Clayton whose client list is a virtual who’s who of industry titans, including hedge funds, private equity firms and banks. The brief from Trump is to have “strong financial oversight” whilst “doing away with oversight that stifles US companies”.

For the issue of anti-corruption, much excitement has been generated in US legal circles by a paper that Clayton co-authored in 2011, criticising FCPA enforcement.

Clayton’s paper sets out well-rehearsed arguments about the effect of compliance programs. Enforcement of FCPA is over zealous and no regulatory framework exists for companies to understand what a satisfactory FCPA compliance program would look like (Despite codes of practices, an issue that many criticise the Bribery Act for as well). Further Clayton’s paper laments the effect on US companies’ appetite for international expansion – due to inherited liabilities from M&A targets and joint ventures. In this scenario, compliance with anti-corruption programs is a competitive disadvantage. It is this latter point that may appeal to the new Trump Administration. Trump is a “deal maker” and if it is perceived that there are obstacles to those deals, there might be a chance that they are swept away.

However, before celebrating and throwing away compliance programs, UK Directors should ponder a different perspective. The paper above refers to effect on US companies and their competitiveness. However, much of the US global anti-corruption work is premised on the belief that non-US companies can gain an unfair advantage over US companies in the global market by indulging in corrupt practices. In this analysis, the US is less the world’s anti-corruption police but a defender of US companies ability to compete on a level playing field. If the early days of transition have shown anything, it is that there is a strain of aggressive economic nationalism at the heart of the new policies in Washington.

So contrary to current thinking in the US, it may very well turn out to be a heightened time for UK companies to ensure compliance with its anti-corruption policies.

This article first appeared in Bloomsbury Law Online.

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