Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act of 1977 (FCPA) (15 U.S.C. § 78dd-1, et seq.) is a United States federal law known primarily for two of its main provisions: one that addresses accounting transparency requirements under the Securities Exchange Act of 1934 and another concerning bribery of foreign officials. The Act was amended in 1988 and in 1998, and has been subject to continued congressional concerns, namely whether its enforcement discourages U.S. companies from investing abroad. The Foreign Corrupt Practices Act of 1977 (FCPA) (15 U.S.C. § 78dd-1, et seq.) is a United States federal law known primarily for two of its main provisions: one that addresses accounting transparency requirements under the Securities Exchange Act of 1934 and another concerning bribery of foreign officials. The Act was amended in 1988 and in 1998, and has been subject to continued congressional concerns, namely whether its enforcement discourages U.S. companies from investing abroad. The core aim of the Foreign Corrupt Practices Act (FCPA) is to prohibit companies and their individual officers from influencing foreign officials with any personal payments or rewards. The FCPA applies to any person who has a certain degree of connection to the United States and engages in corrupt practices abroad, as well as to U.S. businesses, foreign corporations trading securities in the U.S., American nationals, citizens, and residents acting in furtherance of a foreign corrupt practice, whether or not they are physically present in the U.S. This is considered the nationality principle of the Act. Any individuals involved in these activities may face prison time. In the case of foreign natural and legal persons, the Act covers their deeds if they are in the U.S. at the time of the corrupt conduct. This is considered the protective principle of the Act. Moreover, the FCPA governs not only direct payments to foreign officials, candidates, and parties, but payments made to any other recipient in furtherance of influencing a foreign official, candidate, or party. These payments are not restricted to monetary forms and may include anything of value. This is considered the territoriality principle of the act. The FCPA is subject to ongoing scholarly and congressional debate regarding its effects on international commerce. Scholars have found that its enforcement discourages U.S. firms from investing in foreign markets, particularly those where graft, bribery, and other forms of corruption are endemic. This coincides with the well established observation that companies engaging in mergers and acquisitions in emerging markets face a uniquely increased level of regulatory and corruption risk. Investigations by the U.S. Securities and Exchange Commission in the mid-1970s revealed that over 400 U.S. companies admitted making questionable or illegal payments in excess of $300 million to foreign government officials, politicians, and political parties. The abuses ran the gamut from bribery of high foreign officials to secure some type of favorable action by a foreign government, to so-called facilitating payments that were made to ensure that government functionaries discharged certain ministerial or clerical duties. If the official has no choice but to bribe, and bribery is legal in the country, bribing is seen as necessary for 'greasing the wheels', i.e. facilitating the conduct of business. Among the major examples of such practices weres the Lockheed bribery scandals, in which officials of aerospace company Lockheed paid foreign officials in several countries to favor their company's products,:10 and the Bananagate scandal, in which Chiquita Brands bribed the President of Honduras for more favorable government policies. In response to these high profile revelations, Congress enacted the FCPA to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system. The Act was signed into law by President Jimmy Carter on December 19, 1977. The first criminal enforcement action under the Act was against Finbar Kenny. Kenny had advanced Sir Albert Henry, Prime Minister of the Cook Islands, $337,000 from postage stamp revenue for Henry's re-election campaign. In 1979, Kenny became the first American to plead guilty of violating the FCPA, and was fined $50,000. The Act was first amended by the Omnibus Trade and Competitiveness Act of 1988, where Title V is known as the 'Foreign Corrupt Practices Act Amendments of 1988'. It introduced a 'knowing' standard in order to find violations of the Act, encompassing 'conscious disregard' and 'willful blindness.' Other amendments were for 'bona fide', 'reasonable' and lawful gifts under the laws of the foreign country. The second amendment was the International Anti-Bribery Act of 1998 which was designed to implement the OECD Anti-Bribery Convention—i.e., to include certain foreign persons and extending the scope beyond U.S. borders. The FCPA dominated international anti-corruption enforcement from its introduction until around 2010 when other countries began introducing broader and more robust legislation, notably the United Kingdom Bribery Act 2010. The International Organization for Standardization introduced an international anti-bribery management system standard in 2016. In recent years, cooperation in enforcement action between countries has increased.