Five things to know about the Foreign Corrupt Practices Act

First some background on the Foreign Corrupt Practices Act (“FCPA”), the FCPA was passed in 1977 and prohibits companies from paying bribes to foreign government officials and political figures. There are two parts of the act, first, an anti-bribery provision which is enforced by the Justice Department and second, accounting provisions which are enforced by the SEC and apply to any company that holds securities in the United States.

Five things to know:

1. Why care about the FCPA?  It applies to you.  The FCPA applies to you, the act applies to any US or foreign corporation that has filed under the Securities and Exchange Act of 1934 AND it also applies to any US Citizen.
2. What can’t you do?  The Act makes illegal the bribing of any foreign official or political figure either directly or indirectly.  This includes giving money to someone else to give money to a foreign official.  A foreign official is not just considered a high level official, but ANY working for the government.
3. What is bribery?  This seems like it should be an obvious answer, but in this case it isn’t.  Bribery is a payment, in money or material, for the purpose of obtaining or retaining business or directing business to a person.  Even if this is the way business works in this region if you pay an official to give you business, then you are liable under the FCPA. What it doesn’t include is payment to have an official do the job he already legally is required to do or do his job more quickly.  However, this could still be illegal under the foreign country’s law so be careful.
4. What are the accounting provisions? Any company that has securities listed in the United States must make records that fairly and accurately reflect their transactions and have controls to stop corruption.  This does not apply to average citizens.
5. Why should I care? Over the last few years the justice department has significantly increased their enforcement of the FCPA.  In 2008, there were more than 2 billion in fines levied on companies and individuals, some of whom went to jail.  The individuals include anyone who knows of the payments.

In short, the FCPA applies to anyone who is conducting business outside of the United States.  If you are conducting business outside of the US, it is important to pay attention to the FCPA and know what bribery is.