A United States law passed in 1977 that makes it illegal for US companies and individuals to pay bribes to foreign officials in an attempt to gain an advantage in business.
The FCPA stands for the Foreign Corrupt Practices Act. This is a United States law passed in 1977 that makes it illegal for US companies and individuals to pay bribes to foreign officials in an attempt to gain an advantage in business.
Bribery is the offering or giving of something of value to influence the actions of an official or other person in charge of a public or legal duty. It has been used over the years by companies looking to secure valuable business contracts, often in countries where bribery is not viewed as a serious legal problem.
There are two main parts to the FCPA:
Both the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) are responsible for enforcing the FCPA. They can prosecute those who break the law by violating – also known as breaching – the FCPA. But they also have other options if there have been violations of the Act.
In his 2021 article, “The Continuing Façade of FCPA enforcement’’, which was published by The New York University Journal of Law and Business, Rahman Ravelli’s Joshua Ray emphasises that only one FCPA case has gone to trial since 2010.
The others, he explains, have led to some form of agreement or the DOJ stating – in what is called a declination letter - that it will not prosecute if the corporation voluntarily reports the possible FCPA violations to the government, makes changes to prevent it happening again and pays back (also known as disgorges) the gains it made as a result of the bribery.
“Of the more than 130 DOJ enforcement actions targeting entities for FCPA violations since the start of 2010, all but one resulted in a non-prosecution agreement, deferred prosecution agreement, plea, or a DOJ declination letter preceded by an agreement to disgorge allegedly ill-gotten gains.
“In the single exception where a corporate FCPA defendant proceeded to trial, its conviction was thrown out for severe prosecutorial misconduct. This aberration aside, in the forty-three years since the FCPA was passed, no corporate defendant has challenged a civil or criminal FCPA case in court.’’
The FCPA applies to both US publicly-traded companies (those that are listed on a stock exchange) and privately-held companies. It also applies to non-US individuals and companies that violate the Act while they are in the US. A company is responsible for any violations of the Act by its staff, directors and anyone else acting on its behalf.
The list of foreign officials that the FCPA covers includes:
The FCPA is important because it covers the behaviour of US companies anywhere in the world and carries severe penalties.
Any company breaching the anti-bribery provisions of the FCPA can be fined up to $2 million for each offence. Individuals, including officers, directors, stockholders, and agents of companies, can be fined up to $250,000 and imprisoned for up to five years. For each violation of the accounting provisions of the Act, companies can be fined up to $25 million. Individuals can be fined up to $5 million and imprisoned for up to 20 years.
Any breaching of the Act may also lead to a company having to pay large amounts on legal costs, suffering damage to its reputation and / or being excluded from bidding for future government contracts in one or more countries. There is also the risk of legal action being brought by the company’s unhappy shareholders or by other firms who did not gain the contracts that the company gained through bribery.
While the FCPA covers the use of bribery to ensure a country or organisation buys goods and services from those offering the bribe, it also covers:
The FCPA was introduced to target corruption and bribery around the world. The Act was passed at a time when paying foreign officials in order to win contracts or have legal matters resolved quickly and favourably was an activity that many companies were involved in.
Complying with the FCPA involves a company (or an individual) making sure they have taken all reasonable steps to minimise the risk of them carrying out any activity that is a breach of the Act. The US government has published a list of “red flags’’ – situations where those in business should be aware of the risk of bribery.
These red flags are:
But if an offence has been committed, the following factors are likely to affect the penalty (or penalties) imposed:
Both the FCPA and the UK’s Bribery Act were devised to prevent bribery and corruption. But there are differences between them:
Until the Bribery Act came into effect, the FCPA was viewed as the most far-reaching, conclusive anti-bribery legislation in the world. But it is now the Bribery Act that is generally acknowledged as being the most comprehensive piece of legislation of its type in the world today.
The rest of Europe does now appear to be catching up with the US and UK when it comes to bribery legislation, some of which is stricter than the FCPA. Countries such as China and UAE have also developed their own approaches to bribery.
As mentioned earlier, it is rare for a FCPA case to go to trial.
In his NYU article, Josh emphasises that “companies in FCPA cases have—virtually without exception—continued to refrain from challenging law enforcement in favor of reaching a settlement.’’
He adds: “Corporate FCPA settlements are generally not subject to substantive judicial examination, and when a company’s admissions to the DOJ result in criminal charges against individual employees, such cases rarely go to trial. Rather, in virtually all instances the individual defendants plead guilty, thereby ensuring that the DOJ’s factual allegations are never truly questioned in court.’’
Five FCPA settlements have now reached a billion dollars or more.
The biggest cases to date are:
Josh’s NYU article concludes that:
“Considering that the five largest FCPA settlements ever all occurred within the last three years, there is no indication that this enforcement program and the immense industry that has grown around it—dubbed “FCPA Inc.”—will voluntarily depart from the status quo any time soon.’’
Joshua L. Ray (B.A. Cornell; J.D. Cornell Law) is a London-based Partner at Rahman Ravelli and leads our U.S.-facing business crime practice group. Our experts are ideally placed to offer advice and devise a course of action for any individual or corporate in relation to these matters.
Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.
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