By Alex Christensen for Global Risk Insights
At first glance, it is a bit confusing how United States Attorney General Loretta Lynch is able to charge FIFA officials with crimes under United States law, since the organization is headquartered in Switzerland, and the United States is relatively indifferent to the sport.
It is especially intriguing because FIFA President Sepp Blatter has avoided entering the United States for four years to avoid the reach of US law in its investigation of bribery, tax evasion, and racketeering by FIFA officials. While Blatter has not been arrested or charged, most of his executive committee has been.
Now that it is clear that FIFA is not immune to United States laws, with even Switzerland willing to grant extradition (which it has traditionally been reluctant to do), other international businesses and organizations must heed the warning to ensure that they do not fall victim to the broad reach of United States law.
There are subtleties to the FIFA case that slightly blur the lines, such as FIFA’s North and Central American federation (CONCACAF) being headquartered in Miami, but the lesson for multinational businesses and organizations is the same: corruption anywhere will affect your operations in the United States.
The main legal justification for the FIFA charges is the Racketeer Influenced and Corrupt Organizations Act (RICO), but the Foreign Corrupt Practices Act (FCPA) and softer uses of influence are also part of the United States’ international arsenal.
Foreign Corrupt Practices Act
The FCPA produces several multimillion-dollar settlements each year from major corporations across all industries. Already this year, corporations as diverse as thermal imaging company FLIR Systems and mining conglomerate BHP Billiton have paid a total of more than $55 million to settle FCPA charges with the Securities and Exchange Commission (SEC).
This law criminalizes the taking of bribes by nearly any major multinational corporation that operates in the United States, issues securities registered by the SEC, or is required to file reports with the SEC—whether or not the crime occurs in the United States.
In defending themselves against FCPA charges, ignorance of these payments is hardly effective. Any action that furthers illegal payments or willful ignorance of such payments are also FCPA violations.
Since the US is the largest economy in the world, with the largest financial system, companies are faced with a choice: stop bribery or stop operating and issuing securities in the US.
Racketeer Influenced and Corrupt Organizations Act
RICO allows the Department of Justice to charge persons involved with organized crime, but, as the FIFA charges illustrate, the definition of organized crime extends far beyond the mafia and motorcycle gangs.
As long as a group of persons have engaged in criminal offenses such as bribery, money laundering, or securities fraud twice in ten years, RICO can be invoked. Just like FCPA, RICO can be used to prosecute actions that occur outside the United States as long as they are committed by one of its citizens.
By definition, being charged under RICO requires other laws to have been broken repeatedly, which magnifies the United States’ power over companies with even minimal domestic operations.
Other soft power techniques
To see how the United States legal system can interfere with groups outside its shores even without FCPA and RICO, consider how Argentina has been shut out of international capital markets. Federal Judge Thomas Griesa, in ruling for owners of Argentina’s pre-default bonds, warned that any financial institution that operates in the United States would be held in contempt for working with Argentina.
With financial institutions on close watch after the FX and Libor-fixing scandals—as well as Commerzbank AG’s violation of Iran and Sudan sanctions—United States regulators and prosecutors have unlocked an additional avenue for acting against businesses and organizations
Of course, the United States has used the financial system to stop crime, terrorism, and rogue nations before. But the FIFA scandal—when combined with FCPA, RICO, and United States officials’ aggressive attitude in the situation—signals a willingness to go after injustice in a much broader and coordinated way.
All organizations, but especially those operating in countries where kickbacks and bribes are a usual part of business, must carefully navigate the world knowing that inadequate internal controls could open them up to prosecution in the United States.