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What is the Foreign Corrupt Practices Act?

By Felicia Dye
Updated May 17, 2024
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The Foreign Corrupt Practices Act, or FCPA, refers to a body of international anti-bribery laws. This legislation aims to prevent United States (U.S.) entities or affiliates of U.S. entities from making payments to foreign officials intended to encourage those officials to misuse their authority and positions for the sake of business arrangements. Violating these laws is a federal crime and can carry heavy consequences.

According to the standards of the U.S. government, bribery results in unfair advantages. The need for the Foreign Corrupt Practices Act grew out of investigations in the 1970s that revealed that many U.S. companies made questionable or illegal payments to foreign entities. The FCPA was, therefore, a means to prevent businesses from continuing to deviate from American ideals and damaging the credibility and integrity of the American business system.

The Foreign Corrupt Practices Act outlaws the practice of paying foreign officials to obtain or maintain business. It should be noted that this legislation addresses payments made to any public officials, including members of a public office and political candidates. The position or rank of the individuals to whom payments may be directed is irrelevant.

Violations are not limited to direct actions. Conspiracy to commit bribery of foreign officials and the use of third parties to bribe foreign officials are both outlawed. This applies even if the individual who commits the acts operates wholly outside of the U.S. Furthermore, the bribery does not have to be successful for a violation to occur.

The U.S. Justice Department says that “U.S. firms wishing to do business in foreign markets must be familiar with the FCPA.” This includes any U.S. citizen and resident who engages in foreign affairs. The law also covers foreign entities that attempt to engage in such bribery while on U.S. soil.

Violators of the Foreign Corrupt Practices Act can be individuals, firms, and even stockholders who act on behalf of a firm. Violations can carry a number of consequences. Firms and individuals can be prosecuted through criminal and civil procedures.

Large fines are often ordered for corporations found guilty of criminal charges. Fines and incarceration may be ordered for individuals found guilty. When fines are ordered for individuals, these may not be paid by the employer or the principal.

Civil charges may be brought against firms or individuals by the Securities Exchange Commission (SEC). This could result in additional fines for the guilty parties. The Foreign Corrupt Practices Act also leaves room for action to be taken by other parties who have grievances. These could include state or local governments whose laws have been broken or competitors who have suffered losses.

An accused party can attempt to prevent conviction by using an affirmative defense. In many cases, this is done by arguing that the action for which he is accused is legal in the foreign country where it was conducted. It must be noted, however, that the accused bears the burden of proof in such instances.

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