In the news: Offshore accounts launched and the FCPA threat for MNCs
December 06, 2013 | BY
clpstaff &clp articles &The PBOC has given the green light for offshore accounts in the Free Trade Zone and the FCPA threat against multinationals in China is put into perspective
Offshore accounts permitted in trade zone
China Daily reported the announcement from the People's Bank of China (PBOC) that it will permit businesses and individuals to open offshore accounts in the China (Shanghai) Pilot Free Trade Zone. Foreigners will be allowed to open offshore accounts in the Zone and will be treated as local residents for this purpose. Financial institutions in Shanghai can offer offshore accounts through a separate accounting unit for FTZ transactions. There will be no limits on money transfers between offshore accounts in the Zone and overseas accounts.
This is a big move for the PBOC as these accounts will be used for cross-border financing, individual investment by Chinese nationals in overseas securities and by foreigners in the domestic capital markets. This is part of a move towards market-determined interest and exchange rates, as well as promoting full convertibility of the renminbi. For foreign companies, this means that they will be exempt from quotas under the Qualified Foreign Intuitional Investor (QFII) system. As with many of the country's regulations, detailed operating rules have yet to emerge.
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FCPA is biggest bribery threat to MNCs
Bloomberg's article provides detailed analysis of past bribery enforcement actions against multinationals in China. It concludes that despite the country having its own rules against bribery and the recent increase in enforcement actions, the Foreign Corrupt Practices Act (FCPA) is still the biggest threat to companies in China. The article lists examples from Avon, which spent $300 million helping the US to investigate bribery claims in China and any subsequent fines could hurt earnings for the company. Pfizer paid $60.2 million to settle claims that it had bribed doctors and other healthcare professionals in China and seven other countries.
The great thing about this article is that while so much of the focus has been on the China authorities' enforcement actions, it is important to take a step back and reconsider the 42 defendants investigated under the FCPA in the past. FCPA fines are big and have great potential to hurt a company. Thus far, the actions by the China authorities have seen large fines, but nothing that companies cannot balance out. The article also discusses how US officials have tried to get China to join an anti-bribery convention. So far China has been unwilling to sign, but as Xi Jinping clamps down on bribery offences, perhaps this is the next step.
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