FCPAméricas Blog

Beyond the FCPA: Commercial Bribery, the Travel Act, and Compliance

Author: Matthew Fowler

Today’s guest post is from anti-corruption attorney Matthew Fowler who formerly worked as a compliance officer at a multinational defense company.

When I was an in-house compliance officer, the issues that kept me up at night were not the ones covered by our compliance program. They were the unknown unknowns – the issues I feared were lurking just off radar. Commercial bribery fits the profile of that kind of issue, since it is not prohibited by the FCPA. But it is an issue that belongs squarely on the radars of compliance officers.

Commercial bribery – bribes paid to people working in the private sector – is not addressed by the FCPA, which criminalizes promises or payments made to “foreign government officials.” Similarly, U.S. federal law does not prohibit bribery in private commercial activity. However, many states do prohibit commercial bribery, and the Travel Act “federalizes” such state law prohibitions. Failing to properly record commercial bribes could also result in violations of the books and records provisions of the FCPA.

The Travel Act

The Travel Act prohibits the use of means of interstate or foreign commerce if the underlying activity is prohibited by state law. It specifically makes bribery in violation of state law a federal offense.

The relationship between the FCPA and the Travel Act was evident in the prosecution of Control Components, Inc. In 2009, Control Components pleaded guilty to charges that it violated both the FCPA and the Travel Act. The FCPA violations related to corrupt payments to officials and employees of foreign state-owned companies, and the Travel Act related to similar payments to employees of foreign and domestic private companies. These charges were based on California law, which prohibits commercial bribery.

Foreign Commercial Bribery Prohibitions

Commercial bribery may also violate foreign laws. The UK Bribery Act specifically covers bribery in both the public and private sectors. The bribery offences established in the UK Bribery Act relate to payments made or accepted to bring about “improper performance” of a relevant function or activity. According to Guidance published by the UK Ministry of Justice, “improper performance” relates to any function “connected with a business, performed in the course of a person’s employment or performed on behalf of a company or another body of persons… [Bribery] in both the public and private sectors is covered.”

Note that the UK Bribery Act also prohibits both the payment and the acceptance of bribes – including private sector bribes. This is significantly broader than the FCPA, which addresses only the payment of bribes, and then only when paid to foreign government officials. In fact, outside the U.S. there are signs of a trend toward broadening corruption prohibitions to include commercial bribery and acceptance of bribes. A 2003 EU Council decision required all states of the European Union to criminalize both the payment and acceptance of bribes in the private sector. Beyond Europe, the United Nations Convention Against Corruption requires States Parties to “consider” the criminalization of both the payment and acceptance of commercial bribes.

Signs of this trend can also be seen in the Americas. Revisions to the Brazilian criminal code are expected to include criminalization of the payment or acceptance of commercial bribes. The current draft of the revised criminal code would establish that it is a crime to “… demand, request, accept or receive improper advantage, as a representative of the company or private institution, to himself or to third parties, directly or indirectly, or accepts promise of improper advantage, to perform or nor perform an act inherent in their assignments.”

Effects on Compliance Programs

Addressing commercial bribery risk in compliance programs has significant implications for compliance officers, including the following:

1. Compliance officers need to be aware of state and foreign commercial bribery prohibitions. The Travel Act has the effect of “federalizing” state commercial bribery laws, and the DOJ has shown its willingness to prosecute such matters when the recipient is overseas. U.S. companies could also find themselves facing sanctions in foreign jurisdictions for such payments. Compliance officers should know whether the states and countries in which they do business have commercial bribery prohibitions, and they should address those risks in their compliance programs.

2. When conducting risk assessments, compliance officers should take a more expansive view of corruption risks. Corruption risk assessments are often focused on interactions with foreign government officials, but the risk of commercial bribery arises in purely commercial settings. Similarly, corruption risk is not limited to international operations, since the Travel Act applies to both foreign and domestic bribes.

3. Compliance officers should consider addressing the acceptance of commercial bribes in their compliance programs. Gift and hospitality rules may need to be expanded to scrutinize benefits received by company personnel as well as those that they provide.

4. Companies should properly record and report commercial hospitality and similar payments. Failure to report such payments, whether commercial bribes or not, could result in a violation of the FCPA’s books and records provisions.

Making such changes could mean significant changes for compliance officers, but it is better to have such issues on your radar than off. It might even help you sleep.

The FCPAméricas blog is not intended to provide legal advice to its readers. The blog entries and posts include only the thoughts, ideas, and impressions of its authors and contributors, and should be considered general information only about the Americas, anti-corruption laws including the U.S. Foreign Corrupt Practices Act, issues related to anti-corruption compliance, and any other matters addressed. Nothing in this publication should be interpreted to constitute legal advice or services of any kind. Furthermore, information found on this blog should not be used as the basis for decisions or actions that may affect your business; instead, companies and businesspeople should seek legal counsel from qualified lawyers regarding anti-corruption laws or any other legal issue. The Editor and the contributors to this blog shall not be responsible for any losses incurred by a reader or a company as a result of information provided in this publication. For more information, please contact Info@MattesonEllisLaw.com.

The author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author.

@2013 Matteson Ellis Law, PLLC

Matthew Fowler

Post authored by Matthew Fowler, FCPAméricas Contributor

Categories: Anti-Corruption Compliance, FCPA, UK Bribery Act

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