The Hidden Compliance Dangers of U.S. Charter Ops to Mexico – and the Risk to Your Business
Table of Contents / Quick Links
- Introduction – Facilitation payments in Mexico
- The rise of compliance enforcement
- Understanding tips, bribes and ramifications
- Considerations for publicly-traded companies (operators and passengers)
- Identifying if tips are being paid
- Why plausible deniability isn’t a good strategy.
- The potential impact to your business, and your customers.
- Vetting your ground support providers
- Leveraging your ISP
In the highly-competitive world of charter operations, it’s all about delivering the best overall customer experience. And what do most customers want their experience at the airport to be—fast and hassle-free.
So when a ground support provider can provide you the fastest turn times on the field with the least amount of red tape, it may seem like a no brainer to always use them. Your customers are happy. Your crew is happy. All is good in the world, right? Not necessarily.
At some international destinations, there may be ground support providers on the field that choose to make “facilitation payments” to airport employees (i.e. government officials) in order to expedite various procedures and services on your behalf—such as immigration, luggage screening, fuel delivery, etc. These payments are typically small de minimis payments.
Under U.S. and international law, such payments may be considered or have the appearance of being a bribe, and they may result in steep consequences for both charter operators and passengers—whether or not you or your passengers were even aware of such payments being made on your behalf.
Mexico is one of these destinations where the practice of making these “facilitation payments” is common place and still occurs. And because it neighbors the U.S., it’s naturally a frequent destination for U.S. charter operators. In this article, I’m going to cover the basics of what you need to know to identify, understand, and mitigate the potential danger of non-compliant U.S. charter ops to Mexico.
1. Beware the “it’s always been fine” mindset. Times are changing.
Regulatory and compliance enforcement is on the rise—in the U.S., in Mexico, and internationally, overall. Moreover, Mexican authorities are actively implementing new checks and balances to diminish the “convenience” model (e.g., acceptance of facilitation payments) that has historically been common at airports across the country.
So first and foremost, you may want to seriously consider a review of the practices your crew and ground support provider follow in Mexico.
2. Understand that a “tip” to a government official may be considered a bribe to the authorities.
You should never give a tip, or anything of value, to an airport employee or other government official. It may be considered a bribe, even if that’s not the intent. If you’re confronted by a regulatory agency, the burden will be on you and your passengers to prove innocence.
For example, if an operator is confronted by a regulatory agency concerning a tip or something of value given to a government official with the accusation that it was given so that the official wouldn’t look inside a passenger’s bag, the operator and passenger will need to prove that there was no corrupt intent – which is complicated when payments are typically made in cash with no receipts to justify them. Moreover, the regulatory agency may want to look back at your past records of your operations to Mexico to see if this is your regular practice.
Considering the potential lost time, legal fees, bad PR, and lost customers, it’s just not worth being in this situation.
In general, all transactions should be conducted between your service provider and government officials. You should have a zero tolerance policy for tips or facilitation payments to a government official by your employees and any providers working on your behalf – ground support provider, Trip Support Services (TSS) Provider / International Service Provider (ISP), etc.
In addition, you should be actively paying attention to signs which could indicate payments are being made on your behalf, which I’ll cover below.
3. Are you a publicly-traded company? Are you being chartered by one?
Public companies—the charter operator and/or passengers on the flight(s) in question—will face additional scrutiny and risk, as they are not only subject to potential FCPA violations enforced by the U.S. Department of Justice (DOJ), but could also face violations of the U.S. Securities and Exchange Commission (SEC). If facilitation payments or tips are made on your behalf, they need to be recorded properly on your invoice and in the books and records of the organization and validated by a third-party. This may also apply if your charter operation is ever acquired by a publicly-traded company.
4. Watch for the signs. Are you getting preferred treatment? If you don’t, others will.
Can you say YES to any of these below? This could be an indicator that payments are being made on your behalf. If so, talk to your ground support provider, check the regulations, and consult with a knowledgeable third-party. Doing your due diligence is important.
- Does the baggage screening process seem less-than-thorough?
- Is customs clearance happening in a more convenient way, outside of the standard procedure?
- Are you always the first stop for the government-owned fuel truck?
- Is your ground support partner always able to get you in and out faster than your competition?
If you even suspect any of the above is happening, you can’t turn a blind eye. In the eyes of DOJ, plausible deniability does not exempt you and your passengers from repercussions.
Moreover, if your competition sees it, they will use it against you. No passenger representing a Fortune 500 or publicly-traded company will risk flying with you if they believe you are using vendor who makes these payments.
5.Claiming plausible deniability isn’t a good strategy.
You don’t know what your handler does or who they may have tipped, so how could you be held accountable?
The hard truth is that if a provider makes a payment on your behalf to get things done, which may later be considered a bribe, both you and your passengers could be held accountable. The burden will be on you (and your legal team) to prove otherwise. Claiming not to have knowledge of what your third party was doing is not a valid defense. The regulatory agencies see this as a willful disregard of the law and that you should have knowledge. Remember, you cannot outsource to a third party, what you are unable to do yourself (i.e., You cannot outsource bribery.)
6. Understand the potential impact to your business, and your customers.
I’ve already discussed some of your ramifications if facing an investigation alleging a bribe was paid on your behalf to an airport/government official—lost time, legal fees, bad PR, and lost customers.
There are also ramifications if you are even suspected by your customers, or competitors, of utilizing ground handlers who make facilitation payments on your behalf. No publicly-traded company will take the risk of chartering with you if they believe you putting them at risk for an FCPA violation.
As I outlined above, it’s pretty easy to spot preferential treatment when it’s happening. Passengers will always question it if they perceive others are getting preferential treatment over them. How do you think those crews following the law and not paying for the preferential treatment will explain it?
7. Vet your ground support providers, using a compliance lens.
Make sure to do your due diligence in selecting ground support providers / handlers to ensure they are taking the appropriate steps to help you conduct your missions in a compliant manner. Here are some questions you might ask when selecting a handler:
- Is the handler aware of and compliant with the Foreign Corrupt Practices Act and all anti-bribery laws?
- Does the handler understand and have a reputation for following both local and international regulations?
- What process does the handler have to arrange authorizations from local authorities?
- What is the handler’s practice and policy regarding “tips” or “facilitation payments” to officials in order to expedite the process of authorizations?
- What types of training programs have been implemented by the handler?
- What audits has the handler undergone (safety, compliance, financial)?
- Has the handler passed a due diligence/background check?
8. Lean on your ISP / TSS Provider to do the heavy lifting.
If you are working with a TSS Provider, speak with them about their processes for vetting ground support providers and which ones they recommend for a given ICAO. At Universal, we strongly encourage our customers to always use our #1 preferred ground support provider in our database as we have gone through a process of doing our due diligence checks with them.
In Mexico, in particular, we have our own ground support operation – Universal Aviation Mexico. We enforce a zero-tolerance policy on making facilitation payments.
- As of June 2016, the Mexican Federal Criminal Code (FCC) and the National Criminal Procedures Code establish direct corporate liability for criminal activity, and the FCC specifically prohibits any kind of payment to public officials. Corporate entities are liable for such crimes when: (a) they are committed in their name, on their behalf, for their benefit or using means that they provide and (b) due control was not exercised in the company.
- According to the General Law of Administrative Responsibilities (GLAR), which went into full effect in July 2017, legal entities are liable for serious administrative offenses when the acts related to the offense are committed by individuals acting in the name or representation of the legal entity. Under the FCC, it is a criminal offense to make payments to public officials.
- Fox, Tom “Deliberate ignorance and the FCPA.” Compliance Week, March 15, 2017.
- Spearing, Mary “The Payments … Would Not Constitute Facilitation Payments for Routine Governmental Actions Within the Meaning of the FCPA.” FCPA Professor, November 10, 2010.
At airports across Mexico and other international destinations, non-compliant practices still commonly occur. Meanwhile, both local and international regulations, and their enforcement, continue to increase. Ultimately, it’s up to U.S. charter operators to protect themselves and their passengers by ensuring both they and their providers are operating in a compliant manner.
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Please note that this article and the materials available herein are for informational purposes only and not for the purpose of providing legal advice.