On August 6, 2020, the Securities and Exchange Commission (SEC) announced that World Acceptance Corp., a South Carolina-based consumer loan company, agreed to pay $21.7 million to resolve charges that it violated the Foreign Corrupt Practices Act (FCPA). As we discussed in our May 7 report that the company was under investigation, this settlement marks one of the first – if not the only – FCPA enforcement action against a consumer lender. Accordingly, any fintech operating internationally should review its operations and policies and procedures to ensure that it has processes in place to minimize the risk of anti-corruption violations.
The SEC's order states that between 2010 and 2017, World Acceptance Corp.'s former subsidiary, WAC de Mexico S.A. de C.V., paid more than $4 million in bribes to government and union officials in Mexico to secure the ability to make loans to government employees and ensure that those loans were repaid. According to the order, the subsidiary paid these bribes in multiple ways, including by having money deposited in bank accounts controlled by the officials and by using an intermediary to physically deliver bags of cash. The order also concluded that the bribes were inaccurately recorded as legitimate business expenses in violation of the FCPA's books and records provision. Finally, the SEC alleged that World Acceptance Corp. lacked internal accounting controls sufficient to detect or prevent the payment of the bribes and that management's poor "tone at the top" regarding internal audit and compliance undermined the effectiveness of the company's compliance program.
In a statement addressing the resolution, Charles Cain, chief of the SEC Enforcement Division's FCPA Unit, emphasized the importance of the tone set by senior leadership and the need for adequate resources and respect for the audit and compliance functions: "This long-running bribe scheme did not happen in a vacuum. Through a lack of adequate internal accounting controls and a culture that undermined its internal audit and compliance functions, World Acceptance Corporation created the perfect environment for illicit activity to occur for nearly a decade." By accepting the SEC's order, World Acceptance Corp. agreed that the company would cease and desist from violating the anti-bribery, books and records, and internal controls provisions of the FCPA, and would pay $17.826 million in disgorgement, $1.9 million in prejudgment interest, and a $2 million penalty.
Consumer lenders and fintech companies operating abroad, especially in high-risk jurisdictions, need to ensure their compliance programs and internal audit functions are sufficiently empowered to detect and prevent misconduct. Where violations of the FCPA occur, thorough internal investigation and remediation will help minimize the financial penalties that enforcement agencies will seek to impose. In addition to monitoring for FCPA and anti-bribery risks, fintechs should ensure they have policies and procedures in place to manage economic sanctions and anti-money laundering compliance. Venable attorneys work closely with fintechs across all industries and are experienced in advising them on FCPA, sanctions, and AML compliance and investigations.