In our expanding global economy, companies increasingly conduct business internationally. As a result, in-house counsel must be more aware than ever of anti-corruption laws both in the U.S. and abroad.
In the United States, the key anti-corruption statute is the Foreign Corrupt Practices Act (FCPA). Only moderately enforced until the 2000s, FCPA “enforcement actions” have generally increased through 2010 with a slight leveling off in 2011 and 2012. Nonetheless, the statute continues to garner significant attention because of the severe penalties, sparse legal guidance and expansive interpretation of the Act.
The FCPA has two main sections dividing anti-bribery and accounting or “books and records” provisions. The anti-bribery provisions prohibit parties from paying or offering to pay anything of value to a foreign official to influence that official to do anything that helps the offerer obtain or retain business. The books and records provisions require companies to accurately maintain certain record keeping and internal accounting information so they fairly reflect the actual transactions and disposition of assets. The anti-bribery section is generally enforced by the Department of Justice (DOJ) against domestic companies or individuals and foreign persons who violate the FCPA in the United States. By contrast, the books-and-records section is primarily enforced by the Securities and Exchange Commission (SEC).
For the anti-bribery provisions, the FCPA applies to “issuers” (and their officers, directors, employees, agents and shareholders); domestic concerns (and their officers, directors, employees, agents and shareholders); and certain other persons or entities that act while within the United States. For the accounting provisions, the Act covers only “issuers”–companies that are registered with the SEC or are required to file periodic reports under the Exchange Act–though individuals and other entities can be liable for aiding and abetting violation of the accounting provisions. Notably, while the accounting provisions cover a narrower class, they apply regardless of whether the business operates internationally or has engaged in an illegal transaction.
Despite straightforward definitions, applying the anti-bribery provisions in practice is difficult. In November 2012, the DOJ and SEC issued a helpful resource guide that has provided further guidance, including hypotheticals, that further clarifies the scope of FCPA liability. For example, among the situations that appear not to violate the FCPA: A company that provides promotional items to foreign officials at a trade show or pays for a moderate bar tab; a moderately-priced wedding gift for a manager of a government-owned concern with which a company has a contract; and reasonable travel expenses and entertainment at a company’s training facility. In each case, the permissible conduct is distinguished from examples of exorbitant gifts or expenses inconsistent with the claimed purpose.
The accounting provisions, while more straightforward, also pose potential landmines. To comply, companies must keep records sufficiently detailed to accurately and fairly describe transactions. There is no materiality standard, which means even minor transactions and dissipation of small amounts of assets are subject to the requirement. In addition, companies must maintain internal accounting controls to assure transactions are executed and recorded in accordance with management’s authorization.
Other anti-corruption acts
While the FCPA is well-known, U.S. companies doing business abroad must be aware that they are potentially subject to other countries’ local laws and customs, including their anti-bribery laws. Two of the most notable for U.S. concerns are:
- The U.K. Bribery Act: Adopted in 2010, the UK Bribery Act replaced existing common law and modernized longstanding statutes on anti-bribery in the United Kingdom. In general, it creates four types of bribery offenses (making bribes, accepting bribes, bribing a foreign official and vicarious corporate liability for bribes made on their behalf). The Act is broader in than the FCPA in that (1) it applies to all bribes, including purely commercial bribes, not just those to government officials, (2) it applies to the person accepting the bribe as well as the offerer; and (3) there are no exceptions for “facilitation” payments.
- Canadian Corruption of Foreign Public Officials Act (CFPOA): The CFPOA more closely mirrors the FCPA, particularly after recent amendments that strengthened and expanded its reach. In 2013, amendments to the CFPOA formally authorized jurisdiction based on Canadian nationality (regardless of the connection of the conduct to Canada), broadened the definition of subject “businesses” and added a books and records provision, among other changes. 2013 has further proven to be a signal year in Canadian enforcement with a largest fine levied against a company and, in August, the first ever conviction of an individual under the Act.
Regardless of the countries in which they do business, companies must be vigilant when conducting business abroad to ensure their compliance standards–and their employees’ and agents’ conduct–meet the requirements of the growing web of anti-bribery law.