Understanding the Foreign Corrupt Practices Act (FCPA)

​​The FCPA was introduced in response to a series of scandals in the mid-1970s involving major U.S. companies like Lockheed, Gulf Oil, and United Brands, which were found to have paid bribes to foreign officials to secure business contracts. These revelations, spurred by investigations from the SEC and public hearings, underscored the need for legal reforms to restore confidence in American businesses and ensure fair competition globally.

The FCPA consists of two main components:

1. Anti-Bribery Provisions: These provisions make it illegal for U.S. individuals and entities to offer, promise, or give anything of value to foreign officials with the intent to obtain or retain business. This applies globally and includes actions taken through intermediaries like consultants or joint venture partners.

2. Accounting Provisions: These rules require publicly traded companies to maintain accurate books and records and implement sufficient internal controls. This ensures that all transactions are recorded properly, making it difficult to conceal illicit payments.

The SEC and DOJ jointly enforce the FCPA. Penalties for violations can be severe, including substantial fines and imprisonment. Companies may face disgorgement of profits, civil penalties, and oversight by independent consultants. Recent enforcement actions have targeted companies across various industries, demonstrating the act’s wide-reaching impact. For instance, Honeywell and Tenaris faced significant penalties for their involvement in bribery schemes.

The FCPA has set a global standard for anti-corruption laws, influencing other countries to adopt similar regulations. This international framework helps create a level playing field for businesses operating overseas. Companies must establish robust compliance programs to mitigate the risk of FCPA violations. This includes regular training for employees, due diligence on foreign partners, and stringent internal controls.