False Claims Act and Trade Compliance Webinar
In its latest white-collar enforcement guidelines, the U.S. Department of Justice (DOJ) announced that trade and customs fraud will be a key focus area for False Claims Act (FCA) enforcement over the next five years.[1] The FCA will be used to enforce trade compliance. Businesses with trade and supply chains involving the Asia–Pacific region are at risk of FCA exposure and should take steps to mitigate these risks.
Four Alvarez & Marsal (A&M) experts from the United States and China recently participated in a webinar, “FCA and Trade Compliance.” They discussed what FCA is, the relevance of FCA to trade compliance, challenges and risk exposures that businesses face, and the corresponding mitigation strategies.
The A&M experts appearing in the webinar were:
Managing Director Jenelle Beavers – Disputes and Investigations, U.S.
Director Louis Conde – Disputes and Investigations, U.S.
Senior Director Kelvin Cheong – Disputes and Investigations, China
Senior Director Andy Winthrop – Tax, China
Key Insights
The Expanding Role of the FCA in Trade Enforcement
The FCA has become a vital enforcement tool for the U.S. government in addressing fraud related to international trade. Designed to combat false and fraudulent billing and misrepresentation in federal programs, the FCA now plays a growing role in customs enforcement. Its qui tam provisions allow whistleblowers, including employees, suppliers and competitors, to report fraud and receive a share of recovered funds. Increasingly, the FCA is used to pursue reverse claims, such as unpaid tariffs and misclassified imports. With the rise in trade-related scrutiny, companies face heightened exposure to FCA liability, especially as authorities deploy advanced data analytics and artificial intelligence to detect anomalies in import records.
Compliance Challenges and Risk Exposure in Global Supply Chains
Trade tensions have led to steep tariff increases, making compliance more complex and essential. Global supply chains complicate accurate classification, valuation and origin determination. Common schemes include misstating the country of origin through questionable claims of substantial transformation, undervaluing products via related-party transactions or royalty manipulation, and misclassifying HS codes. Addressing these risks requires thorough documentation, historical data analysis and regular compliance reviews.
Governments now use sophisticated tools to identify misclassification, undervaluation and abuse of free trade agreements. Violations can result in substantial financial penalties and reputational harm. The FCA’s 2025–2030 strategy emphasizes whistleblower-driven investigations and stricter enforcement of HS code accuracy and origin fraud.
FCA cases often arise from government inquiries, whistleblower reports or internal disclosures. Agencies like CBP and the DOJ increasingly rely on data analytics to flag suspicious patterns, making it essential for companies to maintain accurate and transparent records. Recent FCA settlements span industries such as pharmaceuticals, home furnishings and engineering, with penalties ranging from hundreds of thousands to tens of millions of dollars.
A case study presented during the webinar illustrates how a U.S. luxury lighting brand relocated 75 percent of its production to Vietnam to mitigate tariff exposure. By aligning operations with U.S. Customs and Border Protection (CBP) requirements and developing a Certificate of Origin (COO) compliance framework, the company achieved approximately $8 million in annual duty savings. This example highlights the strategic value of supply chain realignment and origin planning.
Mitigation Strategies and Support From Alvarez & Marsal
Many companies mistakenly assume compliance but do not verify origin and classification at the transactional level. Incomplete documentation and poor traceability are common issues that expose firms to FCA liability. A robust compliance program is essential to mitigate FCA risk and liability.
To help companies navigate these risks, Alvarez & Marsal offers a range of proactive and reactive services. Proactive support includes:
- Validating supplier declarations
- Monitoring red flags
- Training compliance teams
- Conducting third-party due diligence
Reactive services involve:
- Forensic supply chain analysis
- Transaction-level audits
- Negotiation support with DOJ/CBP
- Expert testimony in litigation
These services are designed to help companies reduce exposure, respond effectively to investigations and strengthen long-term compliance frameworks.
| Watch the Webinar |
[1] U.S. Department of Justice, “Focus, Fairness, and Efficiency in the Fight Against White-Collar Crime,” Memorandum, May 12, 2025, https://www.justice.gov/criminal/media/1400046/dl?inline
