Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act (FCPA) is a federal law that prohibits U.S. companies and citizens, as well as foreign companies listed on U.S. exchanges, from bribing foreign officials to obtain or retain business. Enacted in 1977, the FCPA is a cornerstone of the U.S. government’s efforts to fight international corruption and promote fair competition.
Key Provisions
The FCPA has two main components:
- Anti-Bribery Provisions
- Prohibit offering, paying, promising to pay, or authorizing payment of anything of value to a foreign government official (including employees of state-owned enterprises) to influence a decision or secure an improper advantage.
- Apply to U.S. companies, citizens, and residents. Also apply to foreign companies listed on U.S. stock exchanges or that engage in a bribery scheme within the U.S.
- Accounting & Recordkeeping Provisions
- Require publicly traded companies to maintain accurate books and records.
- Mandate adequate internal accounting controls to prevent and detect improper payments.
Enforcement
- Department of Justice (DOJ) – Handles criminal enforcement.
- Securities and Exchange Commission (SEC) – Handles civil enforcement for publicly traded companies.
- Both agencies frequently collaborate, and penalties can include substantial corporate fines, criminal charges, and the disgorgement of profits.
Penalties
Violations of the FCPA can lead to:
- Corporate Criminal Fines – Often totaling hundreds of millions of dollars. Fines up to $2 million per violation of the anti-bribery provisions. Maximum fine of $25 million per violation of the accounting provisions.
- Criminal Penalties Applicable to Individuals – Fines up to $250,000 per violation and imprisonment up to 5 years for anti-bribery violations. Imprisonment up to 20 years and fines up to $5 million for accounting violations.
- Civil penalties can also be imposed on companies and individuals.
- Reputational Damage – Companies often face severe business and investor backlash.
Whistleblower Opportunities
Whistleblowers play a vital role in uncovering FCPA violations. Reports can be submitted under the:
- SEC Whistleblower Program – Offers awards of 10–30% of monetary sanctions over $1 million.
- Whistleblowers may remain anonymous if represented by an attorney.
- Protections – Federal law prohibits retaliation against whistleblowers who report suspected FCPA violations.
Examples of FCPA Cases
- Goldman Sachs (2020) – Paid nearly $3 billion in global penalties related to the 1MDB scandal.
- Ericsson (2019) – Paid over $1 billion to resolve FCPA case due to making and improperly recording millions of dollars of bribes paid around the world.
- Mobile Telesystems (2019) – Paid $850 million due to bribes paid in Uzbekistan.
- Odebrecht/Braskem (2016) – Paid $3.5 billion in the largest FCPA resolution in history involving bribes across the world.
- Siemens (2008) – Paid over $800 million to resolve charges of systematic bribery across multiple countries.
Updates
- White House Pauses FCPA Enforcement to Prioritize U.S. Economic & National Security
- DOJ Unveils New FCPA Guidelines to Prioritize U.S. Economic & National Security Interests
Resources
- DOJ FCPA Resource Guide
- FCPA: A Resource Guide to the U.S. Foreign Corrupt Practices Act, Second Edition
Why It Matters
The FCPA ensures that U.S. companies and foreign companies operating in U.S. markets play by fair rules, without resorting to corruption. For whistleblowers, reporting FCPA violations is not only an act of integrity but may also result in significant financial rewards through the SEC program.