international regulatory enforcement
Biden Administration’s Central America Initiatives to Include Focused FCPA Enforcement
With the announcement last week of two new task forces targeting crime in Central America, the Biden Administration marked the region as a priority across DOJ’s Criminal Division and as a significant focus for FCPA enforcement going forward. Understanding these new initiatives and monitoring their potential impact will be important for anyone doing business in the region.
Following the release of President Biden’s June 3, 2021 memorandum establishing anticorruption efforts as a core national security interest, on June 7, DOJ issued a press release announcing Attorney General Merrick Garland’s establishment of Joint Task Force Alpha, a DOJ and DHS joint operation targeting human smuggling and trafficking networks in El Salvador, Guatemala, Honduras, and Mexico. While the Attorney General’s memorandum announcing the task force focused exclusively on human smuggling and trafficking, the accompanying DOJ press release emphasized that Joint Task Force Alpha will also complement DOJ anticorruption efforts and that “DOJ will increase its focus on investigations, prosecutions, and asset recoveries relating to corruption in Northern Triangle countries through its Foreign Corrupt Practices Act enforcement program, counternarcotics prosecutions, and Kleptocracy Asset Recovery Initiative.” The press release also notes that legal advisers from DOJ’s Office of Overseas Prosecutorial Development, Assistance and Training (OPDAT) and International Criminal Investigative Training Assistance Program (ICITAP) will work with local prosecutors in the region to build corruption cases and develop leads that can be pursued by the Kleptocracy Asset Recovery Initiative.
On the same day DOJ announced Joint Task Force Alpha, the White House issued a separate statement announcing the creation of a second task force targeting corruption in the region. In a statement released following Vice President Kamala Harris’s bilateral meeting with the President of Guatemala, Alejandro Giammattei, Vice President Harris announced that DOJ and the State Department will establish an anticorruption task force to investigate and prosecute corruption cases with a nexus in the US, Guatemala, and the region. According to the statement, the task force will include three components:
- increased focus of the global Kleptocracy Initiative to prosecute corruption cases and seize illicitly gained assets arising from corruption in Guatemala, El Salvador, and Honduras;
- expand the number of Resident Legal Advisors to provide capacity-building, training, and case-based mentoring to the Guatemalan Public Ministry, including the Special Prosecutor Against Impunity (FECI), to build corruption cases; and
- a rapid response capability to deploy U.S. prosecutors and law enforcement experts to provide mentorship to develop corruption cases.
Taken together, these recent announcements make clear that DOJ and other agencies intend to focus significant resources on pursuing anticorruption enforcement actions in Central America. These initiatives are part of the Biden Administration’s US border and immigration strategy to reduce the volume of migrants and asylum-seekers from the region by targeting the perceived “root cause” issues, including corruption. Given the heightened US political discourse surrounding the issue, we expect the level of anticorruption enforcement activity could increase significantly in the coming years. While Latin America has been a significant focus of FCPA enforcement activity in recent years, the majority of cases have involved conduct in a handful of countries, including Brazil, Venezuela, and Mexico. Relatively few FCPA cases have involved conduct in Central America, despite countries in the region being ranked among the most corrupt in Latin America, according to Transparency International’s Corruption Perceptions Index.
With the prospect of increased enforcement on the horizon, companies doing business in Central America should take proactive steps to address foreign bribery risk and strengthen compliance programs. Those steps should include:
- Closely monitoring developments relating to local investigations and media reports to identify potential risks involving local partners, distributors, and other third parties.
- Taking a fresh look at compliance monitoring frameworks, and appropriately considering both inherent risks and the specific risks targeted by these announcements.
- Conducting appropriate risk assessments throughout the region, including with respect to:
- Third party engagements, due diligence, and oversight (consultants, distributors, partners, etc.);
- Payments related to manufacturing and logistics, customs clearance, and in connection with other import/export regulations;
- Sales-related expenses (marketing, commissions, cash advances, travel, and entertainment expenses, etc.); and
- Adequacy of existing compliance program, including local policies and procedures.
- Reinforcing tone at the top and setting clear compliance expectations within the organization’s operations in the region.
- Establishing or refreshing messaging around corporate whistleblower channels and ensuring appropriate systems and resources to investigate potential issues internally.
With two new task forces focusing on corruption in Central America, companies doing business in the region should expect enforcement activity to increase and begin taking steps to strengthen compliance programs and ensure that foreign bribery risks are being appropriately addressed.