Congress developed the Foreign Corrupt Practices Act (FCPA) during the 1970s to prevent US companies from giving bribes to foreign officials. The Act was amended in 1977 and again in 1998 to broaden the scope of its anti-bribery provisions.
Under the anti-bribery provisions, the Foreign Corrupt Practices Act prohibits US-based individuals and companies from paying foreign officials in order to further business interests. Through its amendments, the act also prohibits making bribes to foreign issuers of securities.
In addition to the anti-bribery provision, the FCPA directs companies with securities listed in the US to abide by certain accounting provisions. Such companies must:
- Make and keep books (and other records) reflecting fair and accurate corporate transactions.
- Develop and maintain an internal accounting system.
In effect, these provisions require companies to develop adequate compliance and oversight systems for accounting and to abide by their disclosure and due diligence duties with respect to corporate transactions.
Although the FCPA most often applies to the activities of large, international corporations, even small businesses can violate the FCPA.
While the US Department of Justice (DOJ) is the primary enforcer of the Foreign Corrupt Practices Act (FCPA), the Securities and Exchange Commission (SEC) also has the authority to coordinate the Act’s enforcement. The Department of Justice may enforce the Act with various criminal sanctions, such as criminal fees and imprisonment. The Securities and Exchange Commission may impose various civil penalties.
The penalties for violating the FCPA range from fines to imprisonment. Penalties cover both businesses and individuals. Here are some penalties that may be triggered by FCPA violations:
- Individual liability resulting in a prison sentence of up to 5 years
- Suspensions from various government contracting programs
- Criminal fines (up to $2 million for a company and up to $100,000 for an individual)
- Up to $100,000 of civil fines (both for a company and an individual)
- Disgorgement of the violator’s pecuniary gain
- Additional civil fines of up to $500,000 for companies and $100,000 for individuals
Note that indemnification by the company is not possible for individuals who have been found guilty of violating the FCPA.
A number of defenses may be raised against an FCPA violation. For example, you can claim that:
- The payment only facilitated a non-discretionary action by the foreign official ("grease payment").
- The payment was lawful under the laws of the country where it was made (very rare nowadays).
- The payment was reasonable and for a very limited purpose.
- You lacked the necessary criminal intent.
A qualified criminal attorney can help you to understand issues related to FCPA compliance. If you may have violated the Foreign Corrupt Practices Act, an attorney can help you develop a defense for your case.