Another global watchdog enters the international bribery, and corruption arena

A first-ever enforcement action by the CFTC targeting foreign corruption lays the groundwork for cases involving other commodities traders. In a settlement with Vitol, the CFTC has advanced a legal theory linking foreign bribery with manipulation of U.S. derivatives markets, as the Derivatives Regulator CFTC, uses Dodd-Frank rule to target foreign bribery

When a top official at a U.S. derivatives watchdog last year said the agency would start policing bribery by multinational corporations, global corporate counsels were in disbelief. The Commodity Futures Trading Commission (CFTC) raid into the world of foreign bribery began publicly in March 2019, when the director of the regulator’s enforcement division, informed global defence lawyers that the agency would pursue violations of commodities rules that involved corrupt payments.

The announcement was first met with cynicism due to the sizable sums already being extracted by U.S. authorities for violations of the Foreign Corrupt Practices Act. The FCPA prohibits U.S.-linked companies from paying bribes to foreign public officials and is actively enforced by the Justice Department and the Securities and Exchange Commission.

Vitol settlement. The recent Swiss energy firm Vitol settlement of $95 million for alleged misconduct stemming from bribes paid to state-controlled oil companies in Brazil, Ecuador and Mexico, lays the legal foundation for future foreign corruption cases by the CFTC. While the agency does not have statutory authority to enforce anti-bribery laws directly, the case introduces a theory for how such conduct can lead to the manipulation and defrauding of U.S. derivatives markets. The Vitol settlement suggests that the agency has more than sufficient legal authority to do so.

Other joint foreign bribery investigations by the CFTC and the Justice Department, which settled parallel criminal charges with Vitol, are in the works. The probe into commodity trading companies such as the Anglo-Swiss Glencore PLC and Singapore-based Trafigura Group Pte. Ltd.

Manipulative device, scheme, or deception to defraud. The hook to bribery and corruption enforcement is on the other end of the transaction. It is not where the foreign corruption took place in the world, but the impact of the transaction on U.S. derivatives markets. The basis for the CFTC’s enforcement action against Vitol is an anti-manipulation rule that was introduced because of the 2010 Dodd-Frank Act and modelled after a securities law prohibiting insider trading.

The rule prohibits using a manipulative device, scheme, or artifice to defraud in connection with the U.S. derivatives markets. In recent years, the CFTC used it to bring a series of civil cases against banks for manipulating the London interbank offered rate, or LIBOR. Among its applications by the CFTC so far also are cases where companies or traders were alleged to have misappropriated nonpublic information.

Source: The Wall Street Journal

More details on the global Bribery Fraud and Corruption mandate, e.g., FCPA, UKBA and CFTC at the International Bribery and Corruption day on 9th December 2021 and The International CSR/ESG Day, 18th February 2021, 09:00 to 13:00 CET.

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