The Foreign Corrupt Practices Act of 1977 (FCPA) is a United States federal law known primarily for its two main provisions. The first addresses accounting transparency and requirements under the Securities Act of 1934. This provision basically makes it illegal for a company that reports to the SEC to have false or inaccurate books or records. It also makes it illegal for a company to fail to maintain a system of internal accounting controls. The second provision concerns bribery of foreign officials. In essence, the Anti-Bribery provision make it a crime for any US individual, business entity or employee of a US business entity to offer or provide, directly or through a 3rd party, anything of value to a foreign government official with corrupt intent to influence an award, to continue a business relationship or to gain an unfair advantage.
The standard of intent and knowledge in Anti-Bribery cases is minimal. Intent and knowledge are usually inferred from that fact that bribery took place. The Accounting provision does not require intent. The SEC will bring Accounting cases as civil actions, so the SEC’s burden of proof is a mere preponderance of the evidence. It is further important to note that the FCPA’s definition of Government Official is extremely broad and includes even low-level employees of government owned companies. A company must understand every way that its business has contact with foreign government customers or employees. It is the legal obligation of all companies that conduct business overseas to make no corrupt payments to foreign officials.
For a company to prevent making corrupt payments to foreign officials the Department of Justice (DOJ) recommends that all companies that do international business enact a standalone FCPA Compliance Policy. The company should not rely on having only a few paragraphs about international corruption buried in its general Standards of Business Conduct. That is not sufficient. A member of the senior management team for the company must be designated as responsible for FCPA compliance and accountable to the program. It is usually best when this position is not assigned to the company’s general counsel. The FCPA Compliance Program is more a “cost of doing international business” than a normal part of the legal department’s budget. The legal department plays a key role in assisting the business team, but imposing the FCPA compliance program on the already overworked general counsel is a mistake.
The first step in creating an FCPA compliance program for the particular company is to assess the risk of noncompliance. In a business with limited overseas operations, this process may consist of nothing more than a deliberate and thoughtful consideration of the relevant issues by knowledgeable individuals in management. For a large multinational corporation the risk-assessment process may involve a wide-ranging internal review in which counsel collects documents, analyzes data, and interviews employees in order to obtain the relevant facts. Once this information has been gathered and analyzed, management and counsel can together determine which aspects of an FCPA compliance program are appropriate for that organization. An organization with extensive dealings involving foreign officials will need a more robust program than an organization with comparatively few overseas operations, and vice versa. The DOJ and SEC had made it clear through previous actions that they intend to seek out and hold accountable any party who violates the Foreign Corrupt Practices Act.
Companies and individuals who violate the FCPA may face consequences under other regulatory regimes, such as the Arms Export Control Act (AECA) and International Traffic in Arms Regulations (ITAR). AECA and ITAR together provide for the suspension, revocation, amendment, or denial of an arms export license if an applicant has been indicted or convicted for violating the FCPA. The Department of State will not consider applications for licenses involving any persons who have been convicted of violating the AECA. In an action related to the criminal resolution of a U.K. military products manufacturer, the DDTC imposed a “policy of denial” for export licenses on three of the company’s subsidiaries that were involved in violations of AECA and ITAR.