In recent years, government enforcement of the Foreign Corrupt Practices Act (FCPA) has increased dramatically. As a result, many companies have heard about the FCPA, but are left wondering how it might apply to them. The list below provides some basic answers to frequently-asked questions.
What does the FCPA prohibit?
The FCPA has two main provisions: (a) an anti-bribery provision that prohibits corrupt payments to foreign officials to obtain or retain business; and (b) a record-keeping provision that mandates accurate record keeping and sound systems of internal controls.
Does the FCPA apply to my company?
The record-keeping provision only applies to companies with securities registered with the U.S. Securities and Exchange Commission and companies that must file reports with the SEC. The anti-bribery provision, however, applies more broadly and encompasses any company with its principal place of business in the United States. Even if your company does not have any foreign operations, it could be held liable for a FCPA violation committed by a foreign agent of your company, such as a business consultant.
Does the FCPA prohibit all payments to foreign officials?
The FCPA prohibits acts that are committed "corruptly" -- in order words, payments intended to induce the recipient to misuse his or her official position. In addition, to be a violation, the payment must have been made to obtain or retain business. However, this requirement is read broadly. For example, payments designed to lessen customs or tax liability are considered as intended to obtain or retain business.
Who qualifies as a foreign official?
The definition of "foreign official" is broad and subject to varying interpretation. The term encompasses not only executive branch employees and legislators, but also employees of state-owned enterprises. The FCPA also bans payments made to foreign political parties, officials of foreign political parties and candidates for foreign office. (In addition, the United Kingdom (U.K.) Bribery Act prohibits improper payments to secure a business advantage that are made to any person, not only foreign officials. Companies that may fall within the jurisdiction of this Act should be aware of its broader scope.)
Are hospitality expenses subject to the FCPA?
Companies sometimes pay travel and entertainment expenses for foreign officials. A defense to the anti-bribery provision exists if the payment was a reasonable and bona fide...