If your business operates overseas, you need to understand how The Foreign Corrupt Practices Act (FCPA) governs what you do. Since 9/11, regulators and prosecutors have refocused their resources and brought increased enforcement against businesses that violate this statute. Even an unintentional violation could do considerable harm to your business.
At Wellfleet Strategies, we help our clients navigate the complexities of today’s global marketplace. If you have questions about how the FCPA may apply to you, we can help.
Basics of the FCPA
The Foreign Corrupt Practices Act applies to American businesses and citizens who operate in foreign countries, prohibiting them from engaging in acts of bribery in order to advance their business interests. It consists of two main provisions:
- The anti-bribery provisions; and
- Provisions concerning record keeping, accounting, and internal controls.
If your business operates in foreign countries, both of these provisions have important implications. Ignorance isn’t an excuse – your business could be in serious trouble even though you weren’t aware that you violated the law.
As mentioned above, the FCPA prohibits American businesses from engaging in acts of bribery. The law applies to publicly traded companies and their shareholders, directors, officers, agents, and employees. It also includes bribery that is committed by way of a third party or other proxies.
Most businesses have no intention of getting involved in bribery. Unfortunately, the business climate in other countries can be very different from what we have here in the United States. In some countries, the government may be a majority stakeholder in a particular company – directing funds to that company as part of a joint venture could suddenly take on the appearance of a bribe.
Similarly, the government may demand that you pay undisclosed fees or taxes in order to operate, again drawing scrutiny from regulators. Understanding how to navigate these situations and comply with the law is critical to your business’s success.
Books, Records, and Internal Controls
If you are a publicly-traded company, the FCPA imposes strict record keeping requirements for companies doing business overseas. In addition, it also requires that you maintain internal controls to ensure that your business transactions are properly recorded. Ultimately, the FCPA imposes a certain degree of transparency that makes it difficult to cover up bribes and other corrupt transactions.
Again, most businesses have no intention of engaging in bribery. But failing to follow these requirements of the FCPA could trigger enforcement, even if you haven’t been involved in bribery.
Violations of the FCPA
Violations of the FCPA are taken very seriously. The United States Department of Justice and the Securities and Exchange Commission have joint jurisdiction over FCPA violations. If charged with a violation, your company could be exposed to both civil and criminal actions and face heavy sanctions and other financial penalties. You could also be subject to government oversight for up to five years.