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FCPA: Recent Enforcement Activity Sounds Warning for Financial Services Industry

By David S. Krakoff, James T. Parkinson and Bradley A. Marcus

When Cheryl J. Scarboro, Chief of the U.S. Securities and Exchange Commission's (SEC) Foreign Corrupt Practices Act (FCPA) enforcement unit, remarked in November 2010 that her unit “will continue to focus on industry-wide sweeps and [that] no industry is immune from [FCPA] investigation,” the financial services industry would have been wise to take notice. Now, with news that the SEC is examining whether banks and private equity firms have run afoul of the FCPA in their dealings with sovereign wealth funds (SWFs), Scarboro's remarks are no longer merely a harbinger for FCPA enforcement activity ' they represent the reality facing the financial services industry.

Scarboro's comments and the SEC's recent SWFs inquiries are even more significant when viewed in the context of FCPA enforcement activity in 2010, which was a record year for both the SEC and the U.S. Department of Justice (DOJ), the statute's enforcers. Consider that, in 2010, the DOJ and SEC: 1) collected eight of the 10 highest monetary penalties ever paid over the 33-year history of the FCPA; 2) brought a combined 74 enforcement actions, nearly doubling the then'record-setting 40 enforcement actions brought in 2009; and 3) focused their enforcement efforts on particular industries. As Assistant Attorney General Lanny A. Breuer remarked: “[W]e are in a new era of FCPA enforcement; and we are here to stay.” Given the DOJ's and SEC's focus on coordinating FCPA enforcement efforts, this “new era” clearly now includes the financial services industry. Accordingly, financial services firms should re-examine their FCPA compliance efforts and proactively manage their FCPA risks.

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