Earlier this year, the US Securities and Exchange Commission (SEC) settled a Foreign Corrupt Practices Act (FCPA) case with KT Corporation, the largest telecommunications operator in South Korea. The facts of the case, as described in the settlement documents, are cinematically scandalous: From at least 2009 through 2017, high level executives at KT maintained enormous slush funds in off-the-books accounts and physical stashes of cash, from which they made illegal political contributions and paid off government officials in both Korea and Vietnam. In their home country, they frequently used these slush funds to pay for substantial unreported gifts, entertainment, and campaign donations to members of the Korean National Assembly who were serving on committees that addressed issues of public policy directly related to KT’s business. Furthermore, after the South Korean press reported on the slush fund allegations back in 2013—reporting that led to a Korean criminal prosecution of KT’s president for embezzlement—the company simply shifted its tactics for filling its slush funds: Rather than siphoning off inflated executive bonuses, KT had its Corporate Relations (CR) Group purchase gift cards, which were then converted into cash to replenish the slush funds. In genuine “cloak and dagger” style, a member of the CR Group would meet the corrupt gift card vendor in the parking lot behind the KT building and receive a paper bag containing a large envelope of cash.

In a magnificent understatement, the Chief of the SEC’s FCPA Enforcement Unit noted that KT “failed to implement sufficient internal accounting controls with respect to key aspects of its business operations,” and that in the future, the company’s leaders should “be sure to devote appropriate attention to meeting their obligations under the FCPA.” But this was not simply a case of a company failing to keep its financial records up to date. Rather, there was a complete and total collapse of any semblance of a culture of compliance at KT. The fact that executives at the highest levels of this corporation, including the president and the CR Group, were directly responsible for these bribery schemes indicates that the culture of this corporation was corrupt, thorough-and-through; bribery was an indispensable component of its business model, and continued even after the company’s president was prosecuted. Yet because KT cooperated with the SEC’s investigation, the SEC only required KT to pay a paltry $6.3 million in combined disgorgement and civil penalties; the SEC also put the company on a two-year probation, during which KT must update the SEC every six months on its compliance measures, though it is unclear what, if anything, will happen if KT somehow mishandles the recommended compliance improvements.

This outcome is unacceptable. If the U.S. government is serious about its intention to deter future misconduct, it must ensure that civil penalties for FCPA violations cannot simply be seen as an “acceptable cost of doing business.” Over the past few years, SEC and DOJ leadership have repeatedly emphasized the importance of anticorruption enforcement and have suggested a desire to reverse the trend of steadily declining FCPA enforcement actions. If deterrence of corrupt corporate conduct is truly a priority for the SEC and the DOJ, then now would be a good time to start substantially ramping up FCPA investigations and enforcement actions, especially in cases of companies like KT that have exhibited the incorrigible culture of brazen corruption.

There are two substantial objections to the call to ramp up FCPA enforcement actions against foreign companies and dramatically stiffen penalties for violations, but on closer inspection neither is compelling.

• First, some critics might object that whatever enforcement approach might be appropriate against an American company, the US SEC and DOJ ought not to seek harsh penalties (or any penalties) against foreign firms for conduct that takes place abroad. As a legal matter, KT was subject to U.S. FCPA jurisdiction because it has American Depository Shares (ADRs) that are registered with the SEC and trade on the New York Stock Exchange. But, critics might argue, even if the US can (as a matter of law) go after a foreign firm like KT, it should not do so, perhaps because of the idea that the US does not have a sufficient interest in preventing foreign firms from bribing foreign officials, or because bringing such enforcement actions might have adverse consequences for U.S. foreign policy (say, by antagonizing an ally, in this case South Korea). But the US does have a substantial interest in deterring foreign bribery, even by non-American firms, at least in those cases when the government of the corporation’s home country is as deficient at securing compliance and rooting out corporate corruption as the South Korean authorities were shown to be in this case. It is a resounding indictment of the Korean anticorruption authorities that this scandal broke in the Korean press nearly a decade ago—revelations that led to the resignation and eventual incarceration of the company’s CEO—but still KT was not required to make any changes to its internal accounting procedures and was effectively permitted to continue with its systematic bribery scheme. As for the concerns that FCPA enforcement actions will cause foreign policy problems by antagonizing foreign allies, that problem is rarely present. In KT’s case in particular, even though the South Korean authorities proved themselves ineffective at holding KT accountable, South Korea is not opposed to doing so—as demonstrated by the fact that there have been and are still ongoing criminal investigations into KT and its affiliates by Korean authorities. This suggests that the U.S. and Korean national interests are aligned with respect to the prosecuting KT, and this is likely to be the usual case when U.S. enforcers go after corporate misconduct in foreign jurisdictions. Of course, when the interests of the U.S. do conflict with those of foreign allies, diplomatic wisdom may call for a lighter touch, but that doesn’t appear to be necessary here.
• Second, some might defend the SEC’s leniency in the KT case by emphasizing that the prospect of leniency is essential to get companies to cooperate with FCPA investigations. Insisting on stiff penalties in cases like KT’s would, the argument goes, erase incentives for corporations to cooperate with investigations. The argument is sound in principle: There is certainly a balance to be struck between ensuring adequate deterrence while still giving companies adequate incentives for disclosure and cooperation. But current conditions are way out of whack. If a corporation knows that cooperating with U.S. authorities will guarantee a light penalty, then deterrence is entirely lost. The company can simply bribe to its heart’s content, reap huge benefits, and then—if but only if the US government has learned, or is likely to learn, about the company’s wrongdoing—the company can self-disclose and cooperate, paying a penalty that, whatever the U.S. might say about insisting on disgorgement of ill-gotten gains, will likely be much less than the company’s profits from years or decades of blatant bribery. So, yes, the U.S. government likely should offer companies some degree of leniency as an incentive for self-disclosure and cooperation. But in cases like KT, the U.S. government has a lot more room to insist on meaningful penalties. And it should do so, if it is really serious about deterring the most egregious forms of corporate corruption.