Foreign Corrupt Practices Act (FCPA

)


The Foreign Corrupt Practices Act is a federal law enacted in 1977 which prohibits companies
from paying bribes to foreign government officials and political figures for the purpose of
obtaining business. There are two provisions to the Foreign Corrupt Practices Act. First, the
anti-bribery provisions which are enforced by the Department of Justice and second, the
accounting provisions which are enforced by the Securities and Exchange Commission (SEC).
There are three types of entities prohibited from making improper payments
Issuers, domestic concerns, foreign nationals and businesses.
The FCPA applies to any person who has a certain degree of connection to the United States and
engages in foreign corrupt practices. The Act also applies to any act by U.S. businesses, foreign
corporations trading securities in the United States, American nationals, citizens, and residents
acting in furtherance of a foreign corrupt practice whether or not they are physically present in
the United States. In the case of foreign natural and legal persons, the Act covers their actions if
they are in the United States at the time of the corrupt conduct. Further, the Act governs not only
payments to foreign officials, candidates, and parties, but any other recipient if part of the bribe
is ultimately attributable to a foreign official, candidate, or party. These payments are not
restricted to just monetary forms and may include anything of value.


Persons subject to the FCPA

 Issuers
Includes any U.S. or foreign corporation that has a class of securities registered, or that is
required to file reports under the Securities and Exchange Act of 1934
 Domestic concerns
Refers to any individual who is a citizen, national, or resident of the United States and
any corporation and other business entity organized under the laws of the United States or
of any individual US State, or having its principal place of business in the United States
 Any person
Covers both enterprises and individuals
As a result of U.S. Securities and Exchange Commission investigations in the mid-1970s, over
400 U.S. companies admitted making questionable or illegal payments in excess of $300 million
to foreign government officials, politicians, and political parties. The abuses ran the gamut
from bribery of high foreign officials to secure some type of favorable action by a foreign
government to so-calledfacilitating payments that were made to ensure that government
functionaries discharged certain ministerial or clerical duties. One major example was
the Lockheed bribery scandals, in which officials of aerospace company Lockheed paid foreign
officials to favor their company's products.
[3]
Another was the Bananagate scandal in
which Chiquita Brands had bribed the President of Honduras to lower taxes. Congress enacted
the FCPA to bring a halt to the bribery of foreign officials and to restore public confidence in the
integrity of the American business system.
The Act was signed into law by President Jimmy Carter on December 19, 1977, and amended in
1998 by the International Anti-Bribery Act of 1998 which was designed to implement the anti-
bribery conventions of the Organization for Economic Co-operation and Development.