CEA Anti-Corruption & Bribery Prevention 3 — Questions and Answers
Question 1: A third-party due diligence program primarily helps a company manage corruption risk by:
- Eliminating the need for written anti-bribery contracts with agents
- Identifying red flags about agents or distributors before engaging them (Correct answer)
- Guaranteeing that no bribery will occur in the supply chain
- Shifting legal liability entirely to the third party if bribery occurs
Correct answer: Identifying red flags about agents or distributors before engaging them
Due diligence on third parties helps identify corruption risk factors—such as government connections, reputation issues, or unusual fee requests—before the relationship begins.
Question 2: Which of the following is a recognized 'red flag' when evaluating a potential sales agent in a high-risk country?
- The agent requests payment via a well-known international bank wire
- The agent requests an unusually high commission with no clear business justification (Correct answer)
- The agent provides references from two previous multinational clients
- The agent has offices in the target country's capital city
Correct answer: The agent requests an unusually high commission with no clear business justification
Requests for unusually high or vaguely justified commissions are a classic red flag indicating potential bribe pass-through to officials.
Question 3: An 'adequate procedures' defense under the UK Bribery Act allows a company to avoid liability for Section 7 offenses if it can show:
- It was unaware that any bribery had occurred
- It had put in place adequate procedures to prevent bribery by associated persons (Correct answer)
- The bribe was paid by a rogue employee without management knowledge
- Its legal counsel reviewed the transaction and raised no concerns
Correct answer: It had put in place adequate procedures to prevent bribery by associated persons
Section 7 provides a complete defense only if the organization demonstrates it had adequate procedures designed to prevent the relevant conduct.
Question 4: Which principle in anti-corruption compliance requires that the seriousness of controls be proportionate to the level of risk faced?
- Zero-tolerance
- Risk-based approach (Correct answer)
- Strict liability
- Collective responsibility
Correct answer: Risk-based approach
A risk-based approach calibrates the intensity of anti-corruption controls to the actual corruption risks the organization faces, ensuring resources are allocated effectively.
Question 5: When a company discovers a potential FCPA violation during an internal investigation, which action is generally recommended first?
- Immediately notify the SEC and DOJ before gathering facts
- Preserve relevant documents and data to prevent spoliation (Correct answer)
- Terminate all employees in the relevant business unit
- Issue a press release disclosing the investigation
Correct answer: Preserve relevant documents and data to prevent spoliation
Preserving documents is a critical first step to avoid obstruction-of-justice issues and to ensure the investigation has an accurate factual record.
Question 6: Which of the following best describes 'books and records' provisions under the FCPA?
- Requirements to maintain accurate financial records that fairly reflect all transactions (Correct answer)
- Mandatory audit of all overseas subsidiaries by U.S. regulators
- Rules requiring companies to publish anti-corruption policies publicly
- Obligations to report all foreign payments to the IRS
Correct answer: Requirements to maintain accurate financial records that fairly reflect all transactions
The FCPA's books-and-records provisions require issuers to keep accurate books and records that fairly reflect transactions and do not conceal corrupt payments.
Question 7: A company operating in a country where 'speed money' to customs officials is culturally routine should:
- Allow such payments since they are local custom and not illegal locally
- Prohibit such payments and find compliant alternatives regardless of local norms (Correct answer)
- Allow payments up to a fixed threshold set by the regional manager
- Report the payments to headquarters but continue making them
Correct answer: Prohibit such payments and find compliant alternatives regardless of local norms
Companies subject to the FCPA or UK Bribery Act must prohibit corrupt payments even where locally practiced, as neither law provides a 'local custom' exception.
CEA Anti-Corruption & Bribery Prevention 3
A third-party due diligence program primarily helps a company manage corruption risk by: