Inotiv Inc. disclosed in its August 2023 SEC filing that it is under SEC investigation for potential FCPA violations. The probe focuses on Inotiv’s importation of primates from Asia from December 2017 to the present day.
This latest probe comes after employees of Inotiv’s main supplier and Cambodian government officials were prosecuted in the U.S. late last year for illegally importing endangered long-tailed macaques into the U.S for research between December 2017 and September 2022.
The macaques were allegedly illegally captured in the wild, but falsely labelled as captive-bred in permits issued by Cambodian governmental officials. The SEC issued a voluntary request for documents to Inotiv to provide information on the importation of Nonhuman Primates (NHPs) from foreign suppliers.
The recent regulatory attention on Inotiv suggests that the U.S. authorities are actively cracking down on potential misconduct and FCPA violations in the context of wildlife trading in Asia. The active government stance in this space comes as no surprise, in light of the public calls for stronger environmental protection led by organisations and activists in recent years (see Hogan Lovells alert The Jungle Crook – Environmental corruption in Laos).
Wildlife Trading in Asia
Operating in the dynamic and diverse business landscape of Asia can be both rewarding and challenging. Many countries in Asia are home to a remarkable variety of wildlife species. With its extensive forests, natural habitat, and richness in biodiversity, Asia has become an attractive region for flourishing wildlife trading businesses. Countries such as Cambodia have become the key supplier of primates for pharmaceutical testing and research in the international market.
While this region presents immense opportunities and resources for legitimate businesses, it also comes with significant corruption risks that businesses must navigate. According to a 2020 report published by the United Nations Office on Drugs and Crime (UNODC), government corruption and bribes play a crucial role in enabling and facilitating illicit wildlife trades. Government corruption can occur at all levels, such as police officers, park rangers, and custom officials, creating loopholes in the global supply chain.
Understanding and addressing the corruption risks are crucial for businesses to ensure compliance with local and international standards, to build a positive reputation, and at the same time maintain ethical business practices.
Next steps
It is important for businesses operating in this region to recognise that if things go wrong, not only there are adverse environmental, ethical, and reputational implications, but also significant financial and regulatory penalties.
For businesses operating in, or looking to expand into this field, we recommend:
- Maintaining robust due diligence and compliance procedures.
- Regularly reviewing bribery risks in the context of local norms, transparency, and governance, and regularly updating ABC training programmes to address evolving risks.
- Monitoring your supply chains closely, including subsidiaries, agents, and suppliers.
- Instructing counsel to review and investigate transactions particularly with government agencies in order to detect potential misconduct at an early stage and effectively implement remediation measures.
Authored by Peter Spivack, Khushaal Ved, Hsiao Tien Tan, and Nigel Sharman.
