Many companies are trying to expand economically in the market by doing business with an individual or another company in foreign countries. These businesses are engaging in into using improper ways of payments that are leading to secret bribes to the foreign public officials. Foreign countries are not always in compliance with the laws and they tend not to follow them. Having these problems with the US and all the millions of dollars that have been passed they wanted to take a more affirmative approach and be able to correct the problem.
That is when congress decided to introduce the Foreign Corrupt Practices Act to prosecute foreign companies for corrupt payments within the United States. The Foreign Corrupt Practices Act is a federal law that was amended in 1977. This law “prohibits the United States from bribing foreign officials to secure advantageous contracts”(1). A foreign official is defined as any officer or employee of the foreign government or any department, agency, public international organization, or any person acting in an official for or behalf any such government or department, agency, or public international organization (2).
The Foreign Corrupt Practices Act was implemented for companies from the United States that are managing business in foreign countries to do so without any unethical business practices (3). This federal law consists of two provisions, the anti-bribery and the accounting/book and record provision. The first provision consists of the anti-bribery provision in which contracts with enforcing the Department of Justice. The DOJ is one of the enforcements for Foreign Corrupt Practices Act (FCPA) in which prosecutes the issuers and their officers, employees, agents, and domestic concern all in which are acting in the US (4).
The anti-bribery of FCPA prohibits anything that deals with payments or an authorization of any payment that obtains or retains with business. There are three types of improper violations for the anti-bribery provision and they include: the issuer, domestic concern, the foreign national and businesses. The issuers are the ones that are registered in the US or are required to file Security and Exchange Commission. Domestic concern is any person or business that have their place of business in the US or are under the US law.
Lastly, the foreign nationals and business in which deals with corrupt payments that are made in the United States (3). There are also the Third parties and agents that are as well included and have the same conditions apply to them as they do to the issuer, domestic concern, and the foreign national and businesses. The second provision that is involved with the FCPA is the Accounting provision and that consist of contracts enforcing Securities and Exchange Commission.
The SEC enforces the Foreign Corrupt Practices Act (FCPA) by bringing the civil actions against the issuers and their officers, directors, employees, and agents (4). FCPA has two accounting requirements that are recordkeeping and internal controls. The recordkeeping is there to ensure that the books, records, and accounts are held at the standards of what the company should be at. This is designed to cover business transactions and accounting control and maintain accuracy with the corporations and their records so that they are limited in violating the FCPA anti-bribery provisions.
The other requirement is the internal control and that deals with the assurance of transactions are in accordance with the management authorization, the transactions are recorded and prepared for financial statements and are maintained accountability for assets, the access is only limited to the managements authorization, and the record accountability for the assets is compared with the existing assets at the regular intervals (4).
There are certain things that gives the FCPA red flags and they consist of a history of corruption in the country, any family relationship between participants and government officials, an unusual pattern in financial arrangements, high commissions, decrease in transparency in expenses and accounting records, lack of qualifications on the agents part for performing services, and misrepresentation in connection with a proposed transaction (8). Each of these jurisdictions works together to keep aspects of FCPA from being violated. This law is not always prohibiting all payments to the foreign officials.
The FCPA has an exception for anti-bribery prohibitions and that is called “ routine government action. ” This exception is also given the names “facilitating” or “ grease payment. ” The Foreign Corrupt Practices Act defines this “routine government action” as for a foreign official to perform in obtaining permits, licenses, or other official documents that enable then to do business in that country, processing government papers such as visa and work orders, protection services and conducting inspections, and anything that has similar nature (6).
The Foreign Corrupt Practices Act (FCPA) has two affirmative defenses and they consist of assertion that payment in question was lawful under the laws of the foreign country, and the assertion that the payment was valued a bona fide expenditure (6). This affirmative defense is aimed to be for the issuer, domestic concern, or other person. In this affirmative defense there must be some type of written law authorizing or supporting the payment. The penalties for violating the Foreign Corrupt Practices Act are different from the provision that they fall under.
For an individual and it is from the anti bribery provision that penalty for civil can be up to $10,000, the criminal fine is up to $250,000 or imprisonment for up to five years, the Fines Act can also increase twice the gross financial gain or loss from the corrupt payment, and the criminal fine for the individual cannot be paid directly or indirectly from the company whose behalf the person acted on. The entities a penalty for the anti-bribery provision consist of civil up to $10,000, for criminal fine up to 2 million, and for the Alternative Fine Act is can also increase twice the gain or lose from the corrupt payment.
Penalties for the accounting provisions for an individual are civil penalty up to $100,000, criminal fine up to $5 million or tice the gain or loss caused by the violation or imprisonment for up to twenty years. The last penalty is for entities in the accounting provisions for civil up to $5000,000, criminal fine up to $25 million or twice the gain or loss caused by the violation (5). Statute of limitation and penalties violations is worth to be a five-year for both the criminal and the civil.
As for the criminal it takes affect when the statute runs from the date the potential offense was committed (7). This can also be suspended for up to three years due to court rules and evidence of an offense in a foreign country (7). In my perspective on FCPA I feel that they have had an impact on the US Commerce. This is so due to the fact of how well they have been enforcing their actions with also the actions for the individuals as well. This also has an affect on the cost of companies that are subject to the Act.
Such things as programs for compliance and conducting internal investigations, the cost of diligence, the subtle cost the companies are having to overcome due to the burdens of their competitors that they don’t have to deal with, and the opportunity for businesses overseas. This law gives the companies a way of economic benefits. When it comes to the international level FCPA can be a disadvantage because it keeps the company from engaging certain businesses that could give an advantage to the other company.
Foreign Corrupt Practices Act has given the international something similar to the FCPA, and that is called the Anti-Bribery Convention (OECD). This convention is against bribery in international transactions in today’s international business environment. The OECD Convention contains an agreement or books and records provision that prohibits the off the books accounts and making inadequate transactions. This also has legal assistance for extradition on bribery offenses.
Since other countries have seen the affects that this law has had on companies they to have also tried to instill their own legislation and enforcement actions. One of them would be the Bribery Act from the United Kingdom. This act is similar to the FCPA and with the anti-bribery regulation (9). The difference between the two is that the Bribery Act does not show enough affirmative defenses and the FCPA allows facilitating payments in which gives more of a open interpretation (9).
The FCPA has a come up with general guidance of the compliance program to try to design and implement a reduction in the violations of the bribery laws. They want the business to implement this so that they can operate effectively and promote value in their organization. This law is set to progress and enforce the businesses to make the right choice and to try to stay away from foreign countries that try to make bribery choices. Over the years FCPA will eventually keep growing into other countries and it will make it harder for the violations to occur.