While all companies conducting business abroad should be concerned about complying with the Foreign Corrupt Practices Act (FCPA), companies in the aerospace and defense industry are potentially more vulnerable to FCPA liability than others. According to the nonprofit anti-bribery association Trace International, aerospace and defense industry members have accounted for approximately 12 percent of the world’s anticorruption enforcement actions since 1977, second only to the extractive industries like oil and mining.
Why Aerospace and Defense Companies Are So Vulnerable
Several recent trends in enforcement of the FCPA and the UK Bribery Act in the aerospace and defense industry are critically important to industry executives due to their severity, scope and even undercover nature. Companies in this industry are particularly vulnerable to exposure under anticorruption laws for several reasons, including:
- They often serve government end-customers, and are therefore in constant contact with foreign government officials.
- They regularly hire agents and foreign consultants to handle their on-the-ground transactions with host country officials.
- The industry is heavily regulated, resulting in greater scrutiny by government agencies and officials.
Industry members and executives who are aware of industry trends and recent enforcement actions can take the necessary compliance steps to minimize their risks.
10 Takeaways from Recent Anti-corruption Enforcement Actions
Did you know?
- The use of third-party agents may be the industry’s single riskiest practice.
- Industry executives could face jail time and substantial fines for their roles in bribery schemes.
- The Department of Justice is turning to undercover law enforcement tactics to investigate industry members for FCPA violations.
- The “Public Authority Defense” may be successful in cases involving national security.
- Multi-jurisdictional enforcement actions and follow-on shareholder lawsuits could lead to even larger penalties to industry members.
- The existence of successor liability for acts of joint venture and merger partners means that comprehensive due diligence is critical.
- Operating in certain developing nations presents heightened risks.
- Even dealings with commercial airlines must be scrutinized if there is a degree of government ownership.
- Satellite companies face emerging anticorruption risks.
- US law enforcement has other tools in its prosecution arsenal, like the Travel Act and export control laws, that are often used in conjunction with the FCPA.
For More Information
To learn more about the 10 takeaways listed above, download and read “Top Trends in Aerospace and Defense Industry Anti-corruption Enforcement” by Latham & Watkins partner Barry Sabin and associate Jessica Thibodeau.