The U.S. Foreign Corrupt Practices Act (FCPA) was enacted in order to make it illegal to bribe foreign public officials to advance business interests.
A ‘bribe’ may take the form of money, or anything of value given in an attempt to influence the person in their official capacity in a manner that may assist in obtaining or retaining business.
Since 1977, the anti-bribery provisions of the FCPA have applied to all U.S. persons and certain foreign issuers of securities.
Since the enactment of amendments in 1998, the anti-bribery provisions of the FCPA also apply to any foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt payment to take place within the territory of the United States.
An example provided in the FCPA Resource Guide is that a foreign national who attends a meeting in the United States that furthers a foreign bribery scheme may be subject to prosecution, as may any co-conspirators, even if they did not themselves attend the meeting and were not physically within the United States.
The FCPA does not require that a corrupt act succeed in its purpose, nor must the foreign official actually accept the corrupt payment in order for the bribe payor to be liable.
What does “anything of value” mean?
The FCPA prohibits the corrupt “offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to” a foreign official.
For a gift or other payment to violate the statute, the payor must have corrupt intent. The most obvious form of corrupt payment is large amounts of cash. Other things “of value” may include gifts, travel and entertainment, which could be classified as “extravagant”, for example a luxury car or an all-expenses paid overseas trip.
The resource guide states that “items of nominal value, such as cab fare, reasonable meals and entertainment expenses, or company promotional items, are unlikely to improperly influence an official”, and as such are unlikely to lead to violations of the FCPA.
What are some examples of “actions taken to obtain or retain business”?
The FCPA applies only to payments intended to induce or influence a foreign official to use his or her position “in order to assist … in obtaining or retaining business for or with, or directing business to, any person.” This requirement is known as the “business purpose test” and is broadly interpreted.
Some examples of action taken to obtain or retain business include:
- Winning a contract
- Influencing the procurement process
- Circumventing the rules for importation of products
- Gaining access to non-public bid tender information
- Evading taxes or penalties
- Influencing the adjudication of lawsuits or enforcement actions
- Obtaining exceptions to regulations
- Avoiding contract termination
Companies may violate the FCPA if they give payments or gifts to an official’s family members, as an indirect way of corruptly influencing a foreign official.
The FCPA also expressly prohibits corrupt payments made through third parties or intermediaries. Specifically, it covers payments made to “any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly”.
Companies are therefore advised to be very cautious about engaging third-party agents or intermediaries, and to be aware that a bribe paid by a third party does not eliminate the potential for criminal or civil FCPA liability.
Who is a foreign official?
The FCPA defines “foreign official” to include:
“Any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization.”
Broadly speaking, the FCPA applies to corrupt payments to any officer or employee of a foreign government and to those acting on the foreign government’s behalf. The FCPA therefore covers corrupt payments to low-ranking employees and high-level officials alike.
The FCPA’s bribery prohibition contains a narrow exception for “facilitating or expediting payments” made in furtherance of routine governmental action. Examples of “routine government action” may include:
- Obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country;
- Processing governmental papers, such as visas and work orders;
- Providing police protection, mail pickup and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country;
- Providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or
- Actions of a similar nature.
The FCPA also requires companies whose securities are listed in the United States to meet its accounting provisions. These accounting provisions, which were designed to operate in tandem with the anti-bribery provisions of the FCPA, require corporations covered by the provisions to create and maintain records that accurately and fairly reflect the transactions of the corporation, as well as devise and maintain an adequate system of internal accounting controls.
Violations of the FCPA can lead to civil and criminal penalties, sanctions, and remedies, including fines, disgorgement, and/or imprisonment.
Further considerations relating to accounting provisions are outlined in the FCPA Resource Guide.