The Foreign Corrupt Practices Act was developed in order to discourage, prohibit, and justly penalize wanton acts of deceitful and dishonest financial business transactions. The Act was adopted by the United States Congress in 1977; it was later amended in 1998 to encompass even more entities under the FCPA umbrella of jurisdiction. The FCPA has two main clauses, including accounting and anti-bribery provisions.
The accounting provisions of the FCPA hold corporations and their subsidiaries liable for fraudulent record keeping and bookkeeping. Under the provisions, “issuers” are required to honestly and accurately record financial transactions and incorporate and maintain a system of checks and balances to ensure that internal accounting is truthful, precise, and reliable.
The anti-bribery provisions of the FCPA prohibit a number of forms of bribery of foreign government officials. Far beyond direct cash payments, such bribery sanctions also include the prohibition of indirect payments through third parties and the offer, promise, or authorization of payment through cash or anything else of value in exchange for an unfair business advantage or in order to obtain or retain business opportunities.
Because the scope of foreign bribery is so vast, the crackdown on such practices requires the cooperation of entities within the federal government and abroad. The responsibility of FCPA enforcement lies mostly with the joint efforts of the Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DOJ). These government entities, however, also rely upon the willing cooperation of international authorities and anti-bribery regulators.
There is no concrete value set on what constitutes a bribe; however, it is the intent behind a gift or payment that establishes the illegality of the action or transaction. While it is fully allowable for a business to award a gift to a foreign official as a token of gratitude or esteem, a gift that is given with the expectation that an unfair business advantage will be given in return makes such “gift” a bribe. A payment made with the sole intention of persuading a foreign official to use his or her influence or political power to gain business, retain business, or receive a business or financial advantage is a clear violation of the FCPA.
When determining whether or not a gift or payment is legitimate and lawful, it is wise to consider what is known as the “Business Purpose Test.” By analyzing the gift or award and asking these simple questions, one can determine whether or not the giving of such gift or award is in violation of the FCPA:
If the answer to any of these questions is yes, the company is likely in violation of FCPA anti-bribery provisions. Gifts may also be in violation of the FCPA if they are intended to help gain general favor toward the company for future prospects, even when a specific business advantage or contract is not specified.
There are three classifications for FCPA jurisdiction indicated in 15 U.S.C. § 78dd which include issuers, domestic concerns, territorial jurisdiction.
Addressed in § 78dd-1, the FCPA defines an issuer as a company that has securities registered under the Exchange Act, Section 12, or if the company is required to file reports to the SEC. More plainly stated, this means that if a company has securities quoted in the U.S. over-the-counter market or if a company has securities listed in the U.S. national securities exchange, the company is required to abide by FCPA provisions and regulations. Some of the most commonly-issued securities are stocks (both preferred and common) and bonds.
FCPA jurisdiction over domestic concerns is addressed in § 78dd-2. Here it is specified that the anti-bribery requirements are applicable to all U.S. companies, corporations, and business individuals, whether or not their business operates within or outside of U.S. borders. Any business organized under United States law or the laws of U.S. states, commonwealths, or territories is covered under this act:
Any business that is under the laws of the country is also under the provisions of the FCPA anti-bribery act. This also includes foreign companies and foreign nationals, and those acting on behalf of a domestic concern.
Finally, the subject of territorial jurisdiction is discussed under § 78dd-3. Under the FCPA anti-bribery provisions, a foreign individual or entity that takes part in a corrupt financial business transaction while in the United States or its territories is subject to prosecution for such acts. Additionally, if the individual takes part in such corrupt practices through the use of United States mail or wires, then his or her conduct is subject to prosecution under U.S. law even if he or she is not physically in U.S. territory at the time of the transaction.
Any behavior that is in violation of the Foreign Corrupt Practices Act, whether the anti-bribery or accounting provisions, is subject to both criminal and civil penalties under U.S. law. Fines, fees, and imprisonment are possible penalties for participating in corrupt business practices, either directly or indirectly. An FCPA lawyer is an invaluable resource for knowledge and representation when faced with prosecution for a violation of the FCPA. The law regarding this act and foreign business affairs can be very complex, and the counsel of a professional legal representative is paramount in the course of investigations and trials.