A United States law passed in 1977 that makes it illegal for US companies and individuals to bribe foreign officials in an attempt to gain an advantage in business.
The Foreign Corrupt Practices Act is a United States law that was passed in 1977. It makes it an offence for US companies and individuals to bribe foreign officials to try and gain an advantage in business.
The FCPA was introduced to target corruption and bribery around the world. It was passed at a time when bribing foreign officials in order to win contracts or to have legal matters resolved quickly and favourably was an activity that many companies were involved in.
There are two main parts to the FCPA:
The United States’ Securities and Exchange Commission (SEC) and Department of Justice (DOJ) are both 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.
It is extremely rare for such cases to go to trial. Most lead 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) any gains it made as a result of the bribery.
But any settlement of FCPA-related allegations cannot be viewed as a painless way of avoiding prosecution. There have been a number of large, multi-billion dollar settlements concluded.
To date, there have been five FCPA settlements that have involved a billion dollars or more being paid:
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 breach of the Act may also lead to a company having to pay large amounts in 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:
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:
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.
The rest of Europe does now appear to be catching up with the US and UK when it comes to bribery legislation. Countries such as China and UAE have also developed their own approaches to bribery.
Anyone who is being investigated – or thinks they are about to be – regarding FCPA-related matters needs to respond promptly and seek the best available advice and representation.
At any given time, Rahman Ravelli is advising clients in investigations that involve both the FCPA and the Bribery Act. We have an internationally-recognised expertise in compiling and co-ordinating teams in the US and UK.
Those we represent in such cases benefit fully from our experience, our in-depth knowledge of the legislation and our ability to devise a “joined-up’’ strategic approach to all elements of such an investigation.
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