Foreign Corrupt Practices Act of 1977 and International Trade

I was recently asked to speak to a reporter about the Foreign Corrupt Practices Act (FCPA).

FCPA focuses on combating the problem of bribing foreign officials to favor, or further, a particular business deal. It also requires the implementation and maintenance of effective internal accounting controls of books and records so that business transactions by issuers of securities traded on a U.S. exchange are accurately reflected.

The FCPA provides for the imposition of monetary and criminal penalties for corruptly paying, or offering to pay, directly or indirectly, money or anything of value to a foreign official to obtain or retain business. Imposition of these penalties is enforced by the Department of Justice (DOJ) with respect to the anti-bribery provisions, and the Securities and Exchange Commission is responsible for the civil enforcement of the anti-bribery provisions with respect to issuers. Prosecution may take place against any individual, or other party, including, a company, director, officer, employee, agent or stockholder of a firm that acts on behalf of the firm.

The FCPA originated in the 1970s from a desire to end the bribing of foreign nationals and thereby cease abuses in American business transactions. In an attempt to restore integrity in business deals globally, in 1988 the U.S. reached out to some of its fellow members of the Organization of Economic Security and Development (OECD), who were also major trading partners with the U.S. Today, nearly 40 other OECD member countries have ratified (signed) the OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions.

So how does it affect international trade? Mainly with respect to exports. So much so, that the DOJ specifically mentions exporters in its introduction to its "Lay Person's Guide to FPCA." A multitude of government regulations and laws govern the exportation of goods in order to try and safeguard U.S. economic interests abroad as well as U.S. foreign policy interests.

While certain practices may be legal in one country with respect to bribing officials in order to obtain a contract with a government - or a greater likelihood of obtaining one - be it for an international sale of U.S. exported goods, or otherwise, that does not mean that those practices, are legal under the FCPA. Therefore, understanding FCPA rules, having a strong FCPA compliance program, and training employees so as to minimize incidents of violations are imperative for any company conducting international business.

For an example of a company that failed to comply with FCPA regulations, click here to read more about the $800 million (out of a total of $1.6 billion globally) penalty that Siemens AG, a German engineering company, was struck with last year by the the U.S. Interestingly enough, the experience has caused Siemens to hold seminars in FCPA compliance in order to assist others with meeting FCPA requirements by identifying its own shortcomings at the time of the penalty.

Looking for more information? Feel free to email me.