What Does the Foreign Corrupt Practices Act Actually Prohibit?
The Foreign Corrupt Practices Act (FCPA) is an American law that targets international corruption. Born out of revelations in the mid-1970s that a number of U.S. companies had engaged in corruption overseas, the FCPA prohibits bribery of foreign officials and requires certain accounting measures that make it more difficult to mask corrupt payments.
Surprisingly, the statute received substantial backing from American business, which could not compete on a level playing field in overseas markets where bribery was common and accepted. In fact, in some countries, corporations routinely wrote – off bribes as business expenses when filing their tax returns. The FCPA’s anti-bribery regime – along with the adoption of treaties, like the OECD Anti-Bribery Convention, that require signatory countries to outlaw corruption – has helped level the playing field for American business.
The FCPA’s anti-bribery provisions restrict payments and gifts to foreign government officials, political parties, and candidates for public office. Those provisions apply to any U.S. person committing bribery abroad and any person (regardless of nationality) committing bribery within U.S. territory. “Person” can include a corporation or other business organization. To establish a violation, which can be punished by both criminal and civil remedies, the government must prove:
- The defendant used a means of interstate commerce – for example, the telephone, the internet, or the mail.
- The defendant offered to pay anything of value to a foreign official, political party, or candidate. Those terms are defined broadly. For example, employees of state-owned companies, like a public university or a state-owned utility, qualify as foreign officials under the FCPA.
- The defendant knowingly, corruptly, or willfully sought to influence an official act or to secure an improper advantage.
That said, the FCPA exempts certain payments. Payments that are lawful under written local law and reasonable bona fide business expenditures are exempt from the FCPA. Some might be surprised to learn that facilitating, or “grease,” payments – a very limited category of payments required to secure routine government actions, like police protection or the processing of an application – are also exempt from the law.
The FCPA also contains accounting provisions that impose record-keeping requirements and internal-control requirements that make it more difficult for companies to disguise illicit payments as legitimate costs and expenses.
Notably, the FCPA does not prohibit the foreign official’s acceptance of the bribe. But, in recent years, the U.S. Department of Justice has used other statutes to prosecute the foreign official alongside the individuals who paid the bribe. For example, Guinea’s former Minister of Mines and Geology was convicted under the U.S. money laundering statute for accepting bribes that violated the FCPA.
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