Contents
What is FCPA?
- Foreign Corrupt Practices Act 1977, USA
- FCPA text PDF
- Foreign Corrupt Practices Act implications
- FCPA cases
Foreign Corrupt Practices Act 1977, USA
FCPA stands for Foreign Corrupt Practices Act. This act came into force in the United States of America in the year 1977. It is an act that prevents payment of bribes to foreign nationals to elicit favorable outcomes. Thereby, it places major restrictions on corrupt practices of individuals as well as firms. It essentially works by tracking any sort of payments made out to assist in business processes or deter a competitor. For instance, a firm may get a contract in a country by bribing government officials in that country.
Over the years, this act has also been elemental in shaping the transparency of accounting practices in the United States. Some of the sections of the act are also applicable to foreign entities and agents. Consequently, it is also applicable to joint ventures, consultants from other countries, business facilitators, etc.
FCPA guidelines
- Firstly, firms need to have a robust bookkeeping practice. The details pertaining to foreign activities need to be accurate. Moreover, it should follow the reporting practices.
- Secondly, The firms that are registered with SEC need to have an internal accounting control system.
- Third, as per the definition of corrupt practice, the corrupt practice may not be limited to monetary reward only. There could be an offer, promise or payment in kind, influencing a political candidate, offer assistance to the promotion of an individual.
- Finally, it also included indirect bribes when the link of benefits can be established between the person receiving some benefit and entity helping the original firm in some way.
Compliance with FCPA
The firms need to have accounting systems that are compliant with the Generally Accepted Accounting Principles or GAAP. As a result. this would be the first step to ensure compliance with the FCPA.
- The most common practice is to hire or recruit experts in FCPA to help in compliance.
- Firms should ensure that there is a system of trust where the violations are reported to the concerned authority. In addition, remedial actions are taken in time to prevent major monetary and reputation damages.
- Sometimes, 3rd party firms can provide better scrutiny of the problems.
- Any employee of the firm who indulges in activities in foreign territories must be trained well in this matter
FCPA text PDF
You may download the pdf for FCPA guidelines from SEC.GOV by clicking here.
(Please note that: It is for reference only and a registered lawyer must be consulted. We hold no liability for the information presented here, apart from presenting references of the publicly available information)
| Lawful acts | Unlawful acts |
|---|---|
| Routine Government Actions | monetary benefits |
| Written Laws | anything of value |
| Bona Fide expenses | indirect benefits |
The Foreign Corrupt Protection Act allows for these three exceptions:
Routine Government Actions – any such acts that are routine in nature. This may include license fees, membership charges, permit costs, visa fees, etc
Written Laws of the foreign land may have provisions for gifting a politician, or offering something of value explicitly stated as acceptable or lawful in the country.
Bona-fide expenses include the cost of travel for foreign delegates, free samples of products and services, etc.
Foreign Corrupt Practices Act implications
Violators face very strict action. The entities found guilty may face penalties and or sanctions as a part of their punishment.
Individuals may face a jail term up to five years
Corporations may face penalties amounting to up to double the potential benefits of the fraud.
Foreign Corrupt Practices Act cases
The US Department of Justice (DOJ) has supreme authority in cases concerning the FCPA. They may take neccessary actions to uphold the principles of this act. Here are some of the cases presented as examples of the violators of this act:
- One of the infamous FCPA cases was concerning ABB in Ltd in Mexico and Iraq. The firm indulged in offering kickbacks to government officials in these countries to get contracts for power companies. Eventually, ABB agreed to pay $39.3m as SEC penalty.
- FCPA charged Airbus with a heavy fine of $2.09 billion in February 2020. The charges were imposed after a British whistleblower uncovered a massive bribery scheme around 2011.
You may check out the complete list of the FCPA violators on the SEC website for your reference.