One of the primary complaints about the Foreign Corrupt Practices Act is that the legislation
What Is the Foreign Corrupt Practices Act (FCPA)?The Foreign Corrupt Practices Act (FCPA, the Act) is a United States law that prohibits U.S. firms and individuals from paying bribes to foreign officials to further business deals. The FCPA contains two main articles: Show
The FCPA applies to prohibited conduct anywhere in the world and extends to both U.S. publicly traded companies and privately held companies. Key Takeaways
Understanding the Foreign Corrupt Practices ActThe Foreign Corrupt Practices Act targets corruption and bribery internationally. Paying foreign officials for expediting legal processes or obtaining contracts was a common business practice around the world well into the 1970s. In some countries, in fact, corporations routinely wrote-off bribes as normal business expenses when filing their tax returns. Being common, however, does not make this behavior desirable or ethical. When the act was passed in 1977, it received substantial backing from American businesses because they could not compete fairly in overseas markets where bribery was accepted. The FCPA’s anti-bribery regime—along with the adoption of treaties like the Organisation for Economic Co-operation and Development's (OECD), which required signatory countries to outlaw all financial crime—has helped to level the playing field abroad for U.S. businesses. Anti-Bribery ProvisionsThe act prohibits bribery of foreign officials and intends to deter corruption and abuses of power worldwide. The FCPA contains policies for governing the actions of publicly traded companies, their directors, officers, shareholders, agents, and employees. This includes working through third parties such as consultants and partners in a joint venture (JV) with the company—meaning that the use of proxies to execute a bribe will not shield the company or individual from culpability. Books, Records, and Internal Control ProvisionsThis section of the act outlines the accounting transparency guidelines that are meant to operate in tandem with the anti-bribery provisions. The FCPA requires companies whose securities are listed in the U.S. to meet its accounting provisions, which cite ways of recording assets that make it difficult to mask corrupt payments. Corporations covered by the act also must devise and maintain internal controls to assure regulators that their business transactions are accounted for properly. Violating the Foreign Corrupt Practices ActThe Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) are jointly responsible for enforcing the Foreign Corrupt Practices Act. For its part, the SEC created a special unit within its enforcement division to focus on matters that fall under the auspices of the FCPA. Violators of the act can face substantial sanctions and penalties, and both criminal and civil actions may be charged. Punishments include fines as much as twice the amount of the benefit expected to be received from the bribery. Corporate entities found guilty of breaching the act may be forced to accept the oversight of an independent auditor to ensure future compliance. Individuals involved in breaking this law can face imprisonment for as many as five years. SEC Sample Rulings in the FCPAThe SEC publishes current violations of the act, along with its enforcement actions, on the SEC website in press release format. The agency also redacts a summary list, organized by calendar year, of individuals and firms that violated the tenets of the act. For example, in 2019, some of the SEC's rulings included actions against:
What is the primary focus of the Foreign Corrupt Practices Act?U.S. Foreign Corrupt Practices Act. FCPA makes it unlawful for a U.S. person or company to offer, pay, or promise to pay money to any foreign official for the purpose of obtaining or retaining business.
Which of the following was a criticism of the Foreign Corrupt Practices Act?Why was the Foreign Corrupt Practices Act criticized? The act formally recognizes the facilitation payments, which would otherwise be acknowledged as bribes.
What type of law is the Foreign Corrupt Practices Act?The Foreign Corrupt Practices Act (FCPA) is a U.S. statute that prohibits firms and individuals from paying bribes to foreign officials to further business deals. Both the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) are responsible for enforcing the FCPA.
What are the two main components of the Foreign Corrupt Practices Act?FCPA has two components, anti-bribery provisions and maintaining accurate books, records, and internal controls so bribes cannot be hidden.
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