Charitable Donation Results in FCPA Enforcement Action by SEC

October 28, 2016

A recent enforcement action by the U.S. Government serves as a reminder that charitable donations can raise anti-bribery compliance risks, particularly where government officials are involved. In September 2016, the Securities and Exchange Commission (SEC) charged Utah-based Nu Skin Enterprises, Inc. (“Nu Skin U.S.”) with violating the record-keeping and internal accounting controls provisions of the Foreign Corrupt Practices Act (FCPA) in connection with a charitable donation made by the company’s Chinese subsidiary to avoid paying a fine to local authorities. Nu Skin U.S. paid almost $766,000 in penalties and disgorgement to settle the charges.

This is the second time – and the first time in over a decade – that the SEC has charged a company under the FCPA solely for its inadequate record-keeping and internal accounting controls surrounding a charitable donation made to influence a foreign official. This enforcement action highlights non-traditional areas of risk that companies subject to the FCPA must manage, particularly the importance of developing and maintaining adequate compliance oversight of interactions between non-U.S. subsidiaries and foreign officials.

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