The Anti-Bribery Prohibitions
The FCPA anti-bribery provision has six key elements. It prohibits the (1) offering or giving, (2) of anything of value, (3) directly or indirectly, (4) to a foreign government official, (5) corruptly, (6) to obtain an improper advantage.
- Offering or giving. An offer or promise is sufficient to meet this element. It does not need to be accepted, and the benefit does not need to be delivered. The prohibition also includes authorizing or approving bribe offers.
- Anything of value. The FCPA sets no minimum value for what constitutes a bribe, and the concept of ˜thing of value” is interpreted broadly. Examples include gifts, meals, entertainment, transportation, charitable donations, discounts, jobs or internships for relatives, and reimbursement of officials’ expenses. A high-risk area for companies involves gifts, entertainment, meals, travel, and accommodation provided to foreign officials, since such payments can be interpreted as (or can become) bribes. FCPAméricas discusses gifts and hospitality here and here.
- Directly or Indirectly. Payments, offers and promises are prohibited whether they are made directly by persons or indirectly by third parties, e.g., local agents, consultants, representatives, or subsidiaries. Companies or individuals can be held liable for indirect payments if they authorize the payments or know that a corrupt payment will be made. Companies or individuals can also be held liable if they should have known – i.e., if they “consciously disregard” a “high probability” that a corrupt payment will be made on their behalf by a third party. One result of this liability is that compliance programs generally emphasize due diligence on all third party agents. (FCPAméricas discusses third party risk here).
- Foreign Official. The term “foreign official” is broadly defined to include any government employee, regardless of their level within the hierarchy, and regardless of whether they are elected, appointed or from state, local, or federal government. It also includes officers, directors, and employees of government-owned companies or other instrumentalities. The state does not have to be the sole owner of the entity for the FCPA to apply. This broad definition, for example, allows a payment to a doctor at a state-owned hospital in a foreign country to be considered a payment to a “foreign official”. Candidates for public office and officers of public international organizations (e.g. World Bank, United Nations, Red Cross, etc) are also considered foreign officials for FCPA purposes.
- Corruptly. The briber must have mens rea – criminal intent – to commit a criminal act. In this case, the briber must have the intent to induce the recipient to misuse his or her public position.
- Improper Advantage. The improper advantage means obtaining or retaining business or securing some other advantage. For example, improper payments might be made to obtain government registrations or approvals, win a government contract, clear equipment through customs, reduce customs duties, secure more favorable tax and tariff rates, or disadvantage a competitor. FCPAméricas discusses the “business purpose” requirements here.
Exceptions and Defenses to the Anti-Bribery Prohibitions
Certain exceptions and defenses apply to the FCPA, though they are often narrowly construed. The FCPA provides a narrow exception for “facilitating payments” (or “grease” payments). These are payments made to further routine governmental action that is nondiscretionary – e.g., that the foreign official is already obligated to perform. Examples include processing visas or supplying utilities. While this exception exists under the FCPA, many companies prohibit facilitation payments because they are high risk and because they often violate local laws (e.g. most of the countries in Latin America prohibit such payments).
There are also two defenses for payments that are otherwise violations of the FCPA. The first applies when the corrupt payment is lawful under the written laws and regulations of the foreign official’s country. The second is for payments that are “reasonable and bona fide” expenses for the promotion, demonstration, or explanation of products and/or services or for the execution of a contract with the foreign government.
The use of these exceptions and defenses implies high risk – they relate to conduct that would otherwise constitute an FCPA violation. Compliance programs generally require that counsel be engaged to advise on and closely monitor such situations.
In addition to the anti-bribery prohibitions, the FCPA also has prohibitions arising from the accounting provisions. Those provisions are applicable only to Issuers, and can be applied independently of the anti-bribery provisions (i.e. they do not require an anti-bribery violation in order to be applicable).
The FCPA accounting provisions prohibit falsifying the books and records of an Issuer. This requirement flows from the FCPA’s requirement that Issuers maintain accurate books and records. This requirement does not mandate specific procedures but is interpreted broadly to require records that adequately explain the nature of transactions and provide an accurate representation of what really occurred in specific transactions and disbursements. There is no materiality requirement for failing to comply with this requirement.
The FCPA also prohibits failing to implement an Issuer’s internal controls system. This prohibition flows from the FCPA’s requirement that Issuers establish and maintain a system of internal controls to assure that: i) transactions are executed in accordance with management’s authorization; ii) access to assets is permitted only with the proper authorization; and iii) the accounting records reflect the existing assets. Again, the FCPA does not require any particular controls. Rather, companies should assess the adequacy of their own controls, which might include benchmarking against the practices of other companies in the same industry and region.
The information in the FCPAméricas blog is intended for public discussion and educational purposes only. It is not intended to provide legal advice to its readers and does not create an attorney-client relationship. It does not seek to describe or convey the quality of legal services. FCPAméricas encourages readers to seek qualified legal counsel regarding anti-corruption laws or any other legal issue. FCPAméricas gives permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author and to FCPAméricas LLC.