Key Takeaways
- Prohibits bribery of foreign officials for business gain.
- Violations include offers or promises, even if unaccepted.
- Applies to U.S. and certain foreign entities and agents.
What is Foreign Corrupt Practices Act?
The Foreign Corrupt Practices Act (FCPA) is a U.S. law enacted in 1977 that prohibits companies and individuals from making corrupt payments to foreign officials to obtain or retain business. It is a critical statute in anti-corruption compliance, affecting corporations and other entities involved in international trade.
The FCPA also includes accounting provisions requiring accurate recordkeeping and internal controls to prevent bribery and maintain transparency in corporate financial reporting.
Key Characteristics
The FCPA’s anti-bribery provisions have several defining features important for compliance:
- Scope: Applies to U.S. persons, companies, and certain foreign entities engaging in corrupt payments to foreign officials.
- Prohibited Acts: Includes offering, paying, or promising anything of value to influence an official’s acts or decisions.
- Covered Payees: Foreign officials, political parties, candidates, and any intermediaries knowingly involved.
- Strict Liability: A payment does not have to be successful to violate the law.
- Enforcement: The U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) oversee investigations and penalties.
How It Works
The FCPA works by criminalizing corrupt payments intended to gain an unfair business advantage internationally. Companies must implement internal compliance programs and maintain accurate books to detect and prevent violations.
Payments or offers to foreign officials must be scrutinized carefully, and corporate officers should ensure adherence to both anti-bribery and accounting provisions. This law intersects with financial reporting, impacting earnings disclosures and transparency.
Examples and Use Cases
Understanding practical applications can help you grasp the FCPA’s impact across industries:
- Airlines: Companies like Delta must ensure that payments to foreign airport officials or government agents comply with the FCPA.
- Consulting and Joint Ventures: Agents and partners acting on behalf of a company can trigger liability if involved in corrupt payments.
- Corporate Finance: Firms often review their facility arrangements and contracts with foreign entities to mitigate risk.
- Investor Considerations: Compliance with the FCPA is crucial for companies listed in indexes such as best large-cap stocks to maintain investor trust and avoid costly fines.
Important Considerations
When navigating FCPA compliance, focus on robust internal controls and employee training to prevent violations. Regular audits of payments and relationships with foreign officials are essential to reduce risk.
Noncompliance can lead to severe penalties, including fines and imprisonment, which can impact a company’s market reputation and financial performance. Investors often evaluate a company’s FCPA risk as part of due diligence, especially in global markets.
Final Words
The Foreign Corrupt Practices Act strictly prohibits any corrupt payments to foreign officials, regardless of whether they succeed. To stay compliant, review your company’s international dealings and implement robust anti-bribery controls immediately.
Frequently Asked Questions
The FCPA is a U.S. law enacted in 1977 that prohibits corrupt payments or offers of anything valuable to foreign officials to obtain or retain business. It is a key anti-corruption statute that applies to U.S. persons, companies, and certain foreign entities.
The FCPA applies to officers, directors, employees, stockholders acting on behalf of a company, agents, joint venture partners, issuers of securities, and even foreign firms or persons who cause corrupt payments to occur within U.S. territory.
The FCPA prohibits payments, offers, or promises of money or anything of value to foreign officials to influence their official acts, induce them to breach lawful duties, or secure improper business advantages.
No, the FCPA prohibits even unaccepted bribes or unfulfilled offers. The attempt or offer to make a corrupt payment is enough to violate the law.
Foreign officials include government officers, political party officials, candidates for foreign political office, and employees of state-owned foreign institutions, including faculty at foreign universities.
A violation requires a payment or offer of value to a foreign official, with corrupt intent to influence the official's actions or secure improper business benefits.
Yes, since 1998, the FCPA covers foreign firms and individuals who cause corrupt payments to occur within the United States, directly or through agents.
