Trafigura is one of the world’s largest commodity trading companies, primarily dealing in the trading and logistics of oil, minerals, and metals. Founded in 1993, Trafigura has grown into a global entity with operations spanning across continents. The company is known for its involvement in the trading of crude oil, petroleum products, metals, and minerals, as well as for its extensive logistics network. Trafigura has faced controversy over the years, including legal battles and accusations related to environmental issues and corporate governance. They have come to an agreement for violations of the Foreign Corrupt Practices Act and has agreed to pay $127million. The Department of Justice has agreed to these findings due to help it received from Trafigura during the investigation.
Enacted in 1977, the FCPA is a United States federal law that aims to prevent bribery and corruption in international business transactions. The law has two main provisions:
- The anti-bribery provision prohibits the bribery of foreign officials to obtain or retain business.
- The accounting provision requires companies whose securities are listed in the United States to maintain accurate records and adequate internal controls.
The FCPA applies to U.S. persons, including citizens, nationals, and companies, as well as foreign companies and individuals acting within the territory of the United States. It has had a significant impact on the way multinational corporations conduct their business globally, promoting transparency and accountability in international transactions. Violations of the FCPA can result in severe penalties, including fines and imprisonment for individuals involved. Auspicium has taught many students about the FCPA in both webinars and in live training programs, usually in conjunction and financial institution fraud. Auspicium works closely with MyCPE, who offers several excellent courses on the FCPA.
Violations of the FCPA can be severe:
- Civil fines: Companies and individuals found in violation of the FCPA’s anti-bribery and accounting provisions may face civil fines imposed by the Securities and Exchange Commission (SEC) or the Department of Justice (DOJ). These fines can range from thousands to millions or even billions of dollars, depending on the scale and impact of the violation.
- Criminal penalties: In cases where FCPA violations involve criminal conduct, individuals and companies may face criminal charges. Criminal penalties can include substantial fines for corporations and imprisonment for individuals involved in bribery or corrupt practices.
- Disgorgement of profits: Violators of the FCPA may be required to disgorge any profits obtained through the illegal conduct. Disgorgement involves surrendering the ill-gotten gains derived from bribery or corruption.
- Remedial measures: Companies found in violation of the FCPA may be required to implement remedial measures to prevent future violations. These measures may include enhanced compliance programs, internal controls, and oversight mechanisms.
- Reputational damage: FCPA violations can lead to significant reputational damage for companies and individuals involved. This can affect relationships with customers, business partners, and stakeholders, potentially resulting in lost business opportunities and diminished market value.
Penalties for failure to comply with FCPA can be severe but as seen in this case with Trafigura, penalties are reduced or can be reduced based on the level of cooperation in investigation and sometimes more so if a company reports that they are not in compliance.
Violations of the FCPA can wind executives in jail if individuals are involved in bribery or corrupt practices. The FCPA allows for criminal prosecution of individuals who engage in bribery of foreign officials or who knowingly falsify records to conceal bribery schemes. If convicted of FCPA violations, individuals can face imprisonment, along with fines and other penalties. As executives, they may face jail time for the actions of their subordinates, especially if found that they knew about the violation but kept it secret.
The severity of the jail sentence depends on various factors, including the nature and extent of the violation, the level of involvement of the individual, and any mitigating or aggravating circumstances. In cases involving significant bribery schemes or repeat offenders, courts may impose substantial prison sentences to deter future violations and uphold the integrity of international business practices.
In addition to criminal prosecution under the FCPA, individuals involved in bribery or corruption may also face charges under other related laws, such as conspiracy, money laundering, or wire fraud statutes, further increasing the potential for imprisonment. Overall, the threat of jail time serves as a significant deterrent to individuals considering engaging in corrupt practices prohibited by the FCPA.
Overall, FCPA enforcement actions can have serious financial, legal, and reputational consequences for those found in violation of the law. As a result, companies operating internationally often invest significant resources in compliance efforts to ensure adherence to FCPA regulations and mitigate the risk of non-compliance.