The Foreign Corrupt Practices Act, FCPA, was enacted to make it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. The FCPA’s anti-bribery provisions generally prohibit making corrupt payments (or giving anything of value) to a foreign official to obtain or retain business.
Foreign Corrupt Practices Act: An Overview Of The United States FCPA
Specifically, the anti-bribery provisions of the FCPA prohibit the willful use of the mails or any means of the instrumentality of interstate commerce corruptly in furtherance of any offer, payment, promise to pay, or authorization of the payment of money or anything of value 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, to a foreign official to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do any act in violation of his or her lawful duty or to secure any improper advantage to assist in obtaining or retaining business for or with, or directing business to, any person.
A foreign official refers broadly to an employee of a foreign government, whether high or low in rank. It also includes employees of a foreign government, which may include a state-owned or state-controlled enterprise. The courts consider factors such as the foreign state’s degree of ownership and control over an entity in determining whether it is an instrumentality of the government. The definition further includes a foreign political party or candidate and officers or employees of public international organizations.
The anti-bribery provisions apply to persons and entities, including domestic concerns and territorial concerns. The provisions also apply to their officers, directors, employees, agents, or stockholders acting on their behalf. Issuers and domestic concerns must use interstate commerce, defined to include trade, commerce, transportation, or communication among the States or between any foreign country and the States, in furtherance of the corrupt act to fall within the scope of the FCPA.
The anti-bribery and corruption requirements of the FCPA have applied to all US persons. With the enactment of certain amendments, the anti-bribery provisions of the FCPA now also apply to foreign firms and persons who, directly or through agents, act in furtherance of such a corrupt payment to take place within the jurisdiction and territory of the US.
The FCPA also requires companies whose securities are listed in the US to meet accounting requirements and provisions. The accounting requirements, designed to operate in tandem with the anti-bribery provisions of the FCPA, require corporations to:
(a) Make and keep appropriate books and records that fairly reflect the transactions of the corporation, and;
(b) Devise and maintain an adequate system of internal accounting controls.
FCPA’s Accounting Provisions
The FCPA’s accounting provisions require keeping the accurate books and records in a reasonable level of detail and to devise and maintain adequate internal accounting controls. The purpose of the accounting provisions is to ensure that entities do not conceal bribes in their financial accounts or use corporate funds for improper purposes.
Although enacted as part of the FCPA, the accounting provisions do not apply just to bribery but set forth a broad standard to be applied to a public company’s accounting for its liabilities and assets. Principal officers of the entity must evaluate and assess these internal controls and certify that they are well-designed as part of periodic financial information filings with the Securities and Exchange Commission (SEC).
The Department of Justice (DOJ) and the SEC share enforcement authority under the Act. The DOJ has criminal enforcement authority, and the SEC has civil enforcement authority over issuers. In practice, the DOJ and SEC settle most FCPA investigations with subject companies rather than obtaining a conviction or court judgment.
The FCPA settlements generally require cooperation with the government, payment of penalties, and remediation commitments. Some in the business community argue for strengthened affirmative defenses based on a company’s implementation of a strong FCPA compliance program. Proponents argue that such a program may provide businesses with certainty about legal exposure. The FCPA settlements mean that there is a relative lack of judicial precedent when it comes to interpreting key FCPA provisions, making it difficult for entities to understand their precise liabilities under the Act.
The FCPA accounting provisions require such publicly traded companies to keep accurate books and records, as well as to develop and maintain an adequate system of internal accounting controls. Individuals and businesses are also prohibited from knowingly falsifying books and records or knowingly circumventing or failing to implement an internal control system. When confronted with FCPA issues, US persons or companies, or covered foreign persons or companies, should consult an attorney or use the Department of Justice Opinion Procedure.