The Foreign Corrupt Practices Act (FCPA)
The Foreign Corrupt Practice Act or FCPA is a federal law prohibiting the bribery of foreign officials to obtain a business advantage in foreign countries. The Act has two main provisions – anti-bribery and accounting.
The anti-bribery portion of the Act is simple. US businesses (And foreign businesses while operating in the United States) cannot bribe foreign government officials. A bribe is considered any gift of value. Therefore, both monetary and non-monetary gifts are covered under the Act. Items such as travel, charitable donations, and entertainment are just as illegal to offer as money.
Violators may be prosecuted even if the gift was only promised and not given or if the gift was given but didn’t result in a business advantage. The intent is the most important factor in a decision to prosecute.
Sometimes what appears to be private business, may actually be government business. For instance, many foreign governments operate banks that appear to be private from the outside. In addition, governments often employ consultants or agents that report directly to government officials. These relationships can be murky and often it takes research and great care to understand them.
9 out of 10 prosecutions involve third-party agents. These are agents that US businesses employ in foreign countries. Often, these agents don’t understand the law and end up getting their employer in trouble. Any use of third party agents should require a signed FCPA policy.
The accounting provision of the Act requires US businesses to follow internationally recognized and accepted accounting procedures otherwise known as GAAP. These requirements ensure transparency and discourage violations by making criminal activity much easier to detect.
Both the SEC and the Department of Justice work together to investigate and prosecute FCPA violations. The penalties can be severe and include prison sentences and large fines.