Financial Controls, Books and Records, and Red Flags
Books and records
The FCPA accounting provisions require issuers to keep books and records that accurately and fairly reflect transactions and to maintain a system of internal accounting controls. False invoices, off-book accounts, side letters and vague descriptions can breach these provisions even if no bribe is proven.
Financial controls
Segregate duties, set approval limits, verify vendor bank accounts, match invoices to contracts and deliveries, control petty cash and journal entries, and review manual payments. Finance should challenge unusual commissions, cash payments, round sums and payments to offshore accounts.
Red flags
Watch for missing documentation, duplicate invoices, payments to unrelated jurisdictions, agents with no staff, unusually high commissions, changes to bank details, and requests to split invoices or use third-party accounts.
Worked example
A US$5 million “consultancy” invoice has no scope, is paid to a Cyprus account and is approved only by the sales director. The description does not explain the service, the payment route is opaque, and approval lacks segregation. This is both a control failure and a possible slush fund; finance should withhold payment and escalate.
Traps
Treating accounting failures as less serious than bribery. Leaving internal controls to finance alone; sales and procurement create the risks. Ignoring small write-offs and manual journals. Assuming an audit opinion proves the books are clean.