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Financial Institutions at Risk: The Growing Threat of FCPA Investigations

The US Department of Justice (DOJ) and Securities and Exchange Commission (SEC) have increased their focus on Foreign Corrupt Practices Act (FCPA) investigations, targeting financial institutions, hedge funds, and private equity firms. This trend is evident in recent cases involving major players like JP Morgan Chase, Goldman Sachs, and Morgan Stanley.

Recent Examples of FCPA Investigations

JP Morgan Chase

• Closed a Vatican bank account due to concerns about money laundering.
• Implications: Financial institutions must be vigilant in detecting and preventing bribery schemes involving their clients, subsidiaries, or investment assets.

Goldman Sachs

• Under investigation for its relationship with the Libyan Investment Authority (LIA), a sovereign wealth fund.
• Takeaways: Companies must review their auditing practices and internal processes to ensure compliance with institutional policies and follow up on red flags.

Morgan Stanley

• Former Managing Director Garth Peterson settled FCPA charges.
• Lessons learned: Financial institutions, hedge funds, and private equity firms may be subject to money laundering laws if they fail to detect or prevent bribery schemes involving their clients, subsidiaries, or investment assets.

The Importance of Internal Controls and Anti-Money Laundering Policies

The DOJ’s and SEC’s aggressive anti-corruption agenda requires financial institutions, hedge funds, and private equity firms to re-examine internal controls and anti-money laundering policies. Companies must be proactive in detecting and preventing bribery schemes involving their clients, subsidiaries, or investment assets.

International Enforcement: A Growing Concern for Financial Institutions

Other countries, such as the UK, are committed to enforcing anti-corruption laws and may target financial institutions operating within their jurisdictions. To avoid money laundering or FCPA charges, companies must review their internal processes and auditing practices to ensure compliance with institutional policies.

Conclusion

Financial institutions, hedge funds, and private equity firms must be vigilant in detecting and preventing bribery schemes involving their clients, subsidiaries, or investment assets to avoid being targeted by regulatory authorities. By re-examining internal controls and anti-money laundering policies, companies can mitigate the risk of money laundering or FCPA charges and maintain a strong reputation in the industry.