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The bigger risk for EB-5 issuers is that if the agent pays money
or gives gifts to government officials in the course of its engagement, the U.S. company may be deemed to have authorized
the agent to pay bribes on its behalf in violation of FCPA. For
example, a U.S. company would violate the FCPA if it retained
an agent to perform any of the following actions on its behalf:
•
The agent makes an improper payment
to secure an exit visa for an investor
Recipe for an Effective FCPA Compliance
Program for EB-5 Issuers
The most recent guidance from the FCPA enforcement
agencies on what they consider an effective compliance program appears in the Resource Guide as the 10 “Hallmarks of
Effective Compliance Programs.” These hallmarks should be
a starting point in designing your company’s program.
While the SEC and DOJ expect a large multinational corporation to have a rigorous and customized compliance and
ethics program. Small companies – which would include most
EB-5 issuers – may have a simpler and less formal program
that is nonetheless recognized as “effective.” For example the
smaller company need not have a separate compliance staff, it
can provide training in informal staff meetings, and can even
model its compliance program on existing programs and best
practices of other similar organizations.
The following nine2 elements are based on the Resource
Guide’s “Hallmarks” that are most relevant to the typical
EB-5 issuer:
1. Commitment from Senior Management and a Clearly
Articulated Policy Against Corruption. Most EB-5
is suers are organized and led by one or two principals.
These individuals must have a lead role in developing
and communicating the compliance program and set
a clear “tone at the top.” A company’s employees or
independent contractors may look for signs or signals
that the compliance program is purely for show. The
company’s leaders must avoid any ambiguity and
make it clear that avoidance of corrupt activity – and
a determination to follow all laws and regulations
– reflects their wishes and is at the core of the
company’s culture.
2. A Written Compliance and Ethics Program. The FCPA
compliance policy underlying the program should be
in writing, it should be part of the company’s overall
code of conduct and ethics, and it should be included
in the employee handbook or otherwise made easily
available. The written policy can be brief, but should
clearly state the nature of the FCPA’s prohibitions and
the company’s commitment to abiding by them.
3. Oversight, Autonomy, and Resources. The company
must assign responsibility for the compliance program
to specific individuals within an organization, and
ensure they have the appropriate authority and
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•
The agent pays an official to grant permission to
market the EB-5 offering in a particular territory
•
The agent pays an honorarium or gives a gift to
a local official for the official’s appearance at a
marketing event or a “photo opportunity” at which
the official expresses government approval or
endorsement of an EB-5 investment opportunity
•
The agent bribes or arranges for the bribery of banking
or customs officials to circumvent currency controls.
sufficient resources for the program to operate
effectively. For a small organization like the typical
EB-5 issuer, with few layers of management, no
dedicated compliance officer is needed. The active
engagement of the principals or a chief financial
officer or controller may suffice. As the organization
grows, it needs to periodically re-evaluate whether it
needs to increase the oversight function to maintain
an effective program.
4. Due Diligence Before Engaging Officers and Agents.
Because EB-5 issuers are especially exposed to FCPA
risk in engaging foreign agents and independent
contractors, this will be a key feature of any EB-5
issuers compliance program. The compliance program
should provide that the organization will not engage
an officer or agent that it knows, or should have
known, has a history of illegal or corrupt activity.
EB-5 issuers in particular should develop a due
diligence process to be followed before engaging any
foreign contractors or agents, and agreements with
foreign contractors should have covenants requiring
FCPA compliance.
5. Training and Continuing Advice. All officers and
staff who interact with foreign officials should
receive FCPA training on an annual basis and
provide certification that they fully understand
the requirements of the FCPA and the company’s
compliance program. In small organizations, like
most EB-5 issuers, training can be informal, but
it must take place and the company must record
that it has taken place. Third party providers offer
generalized training materials in FCPA, but the key
will be training in the specific risks for EB-5 issuers;
for example, how to interact with local government
officials when marketing an investment, how to
conduct due diligence on a potential agent or
independent contractor, and how to respond when a
contractor proposes an improper payment to expedite
a transaction. All officers and staff who interact with
foreign officials must know whom they should freely
and safely contact for further guidance if they have
any questions about the compliance program.
6. Incentives and Disciplinary Measures. The
organization must be consistent in enforcing its
compliance program. The structure of a typical EB-5
issuer does not call for a detailed system of incentives
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