Foreign Corrupt Practices Act

Foreign Corrupt Practices Act (FCPA)

Key takeaways
* The FCPA is a U.S. law that prohibits paying bribes to foreign officials to obtain or retain business.
* It has two main components: anti-bribery provisions and books, records, and internal control requirements.
* The Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) jointly enforce the FCPA.
* Violations can trigger civil and criminal penalties, large fines, and prison terms for individuals.

What the FCPA prohibits
The Foreign Corrupt Practices Act bars U.S. firms and individuals from offering, promising, or giving anything of value to foreign government officials to influence official action or secure an improper business advantage. The prohibition covers direct payments as well as payments made through third parties, agents, consultants, or joint-venture partners: using a proxy does not shield a company or individual from liability.

Scope and who it covers
* U.S. persons and entities.
* Companies whose securities are listed in the U.S.
* Conduct that occurs anywhere in the world if it involves covered persons or U.S. jurisdictional elements.
The law is intended to level the playing field for U.S. businesses in international markets and to deter corruption globally.

Two core provisions
1. Anti-bribery provisions
* Outlaw bribery of foreign public officials, political parties, and candidates to influence official acts or secure business advantages.
* Reach conduct by employees, officers, directors, agents, and third parties acting on a company’s behalf.

1. Books, records, and internal control provisions
2. Require issuers to keep accurate books and records that reflect transactions and dispositions of assets.
3. Require companies to maintain internal accounting controls that make it difficult to conceal improper payments or corrupt activity.

Enforcement and penalties
* The SEC and DOJ share enforcement responsibility. The SEC enforces civil accounting and recordkeeping requirements; the DOJ pursues criminal and civil anti-bribery violations.
Penalties can include substantial fines, disgorgement, and corporate monitorship (independent auditors or compliance monitors).
Individuals may face criminal charges and prison terms (statutory penalties include imprisonment up to five years in many cases). Fines can be tied to the value of the improper benefit (in some cases assessed as multiples of the benefit).

Notable enforcement examples
* Ericsson: Resolved FCPA charges with combined SEC and DOJ sanctions exceeding $1 billion related to use of sham consultants to funnel payments to officials.
Microsoft: Paid more than $24 million in an SEC settlement involving alleged FCPA violations in multiple countries.
Tim Leissner (former Goldman Sachs executive): Barred from the securities industry and subject to sanctions for involvement in bribery schemes.
* Walmart: Faced combined SEC and DOJ resolutions totaling hundreds of millions of dollars for failures in anti-corruption compliance and recordkeeping.

Compliance and best practices
* Establish and maintain robust anti-corruption policies and training for employees and agents.
Conduct due diligence on third parties, consultants, and joint-venture partners.
Implement strong accounting and internal control systems to ensure transactions are properly recorded and reviewed.
Monitor international operations and promptly investigate red flags or allegations of corruption.
Consider using independent audits or compliance monitors when weaknesses are identified or as part of remediation.

Conclusion
The FCPA is a central U.S. tool for combating international bribery and requires firms to prevent corrupt payments and to maintain transparent accounting and controls. Effective compliance programs, careful third-party oversight, and accurate recordkeeping are essential to reduce risk of violations and severe enforcement consequences.