Risk & Compliance

SEC Charges Consumer Loan Company With FCPA Violation

World Acceptance's former Mexico subsidiary paid more than $4 million in bribes to Mexican officials, said the SEC.
Vincent RyanAugust 7, 2020

World Acceptance, a South Carolina-based consumer loan company, agreed on Thursday to pay $21.7 million to resolve charges that it violated the Foreign Corrupt Practices Act (FCPA).

The Securities and Exchange Commission said that from at least December 2010 through June 2017, World Acceptance’s former Mexican subsidiary, WAC de Mexico S.A. de C.V., paid more than $4 million in bribes to Mexican government officials and union officials. The bribes were intended to secure the ability to make loans to government employees and ensure that those loans were repaid in a timely manner.

According to the SEC’s order, WAC Mexico paid the bribes in a variety of ways, including by depositing money into bank accounts linked to the officials and by hiring an intermediary to distribute large bags of cash among the officials.

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“This long-running bribe scheme did not happen in a vacuum,” said Charles E. Cain, Chief of the SEC Enforcement Division’s FCPA Unit. “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.”

The SEC charged that WAC failed to make and keep accurate books and records and failed to devise and maintain a sufficient system of internal accounting controls necessary to detect and prevent the bribe payments. The bribe payments were also inaccurately recorded as legitimate “commission” expenses in WAC’s books and records.

WAC also failed to implement sufficient internal accounting controls over vendor management and accounts payable at WAC Mexico, failed to provide reasonable assurances that WAC Mexico had implemented an FCPA policy and was adhering to it, failed to provide FCPA training at WAC and WAC Mexico, and lacked sufficient entity-level controls over WAC Mexico, the SEC said.

For example, WAC Mexico did not have a sufficient accounts payable system, the SEC said. Manual checks were used for payment, which resulted in managers pre-signing blank checks, making it impossible to enforce authorization limits in place over payments, according to the SEC order. Moreover, WAC Mexico manually prepared a monthly spreadsheet that listed the checks paid that month and provided an expense category for each check.  WAC Mexico sent the spreadsheet each month to WAC’s accounting department in Greenville, South Carolina, without invoices or backup support, and WAC failed to require such backup support, according to the SEC.

In addition to the controls failures, the SEC said that “the tone at the top from WAC management did not support robust internal audit and compliance functions, and undermined the effectiveness of those functions.”

Through a series of several moves beginning in 2015, the CEO of WAC weakened the company’s internal audit function and fired two vice presidents of internal audit and compliance when they raised concerns that the company’s controls and compliance measures were inadequate.

Without admitting or denying the SEC’s findings, World Acceptance consented to the entry of an order requiring that the company cease and desist from violating the anti-bribery, books and records, and internal controls provisions of the FCPA, and pay $17.826 million in disgorgement, $1.9 million in prejudgment interest, and a $2 million penalty.