What Is the Foreign Corrupt Practices Act?


By Mary Richter

Congress enacted the U.S. Foreign Corrupt Practices Act (FCPA or the Act) in 1977 in response to revelations of widespread bribery of foreign officials by U.S. companies. The Act was intended to halt those corrupt practices, create a level playing field for honest businesses, and restore public confidence in the integrity of the marketplace.1

In recent years, there has been increased scrutiny and some significant penalties imposed (and paid) for violations of this statue. In addition to monetary and criminal penalties, the company’s reputation could be significantly harmed by negative press coverage.

The Act applies to U.S. companies doing business overseas (including foreign subsidiaries of U.S. companies). The law states that no American company, its affiliates, representatives or partners can be involved in bribing or otherwise improperly influencing foreign government or political party officials. Under this law, U.S. companies must exercise due diligence to ensure that its subsidiaries also comply with these rules, and that they are not aware of any prohibited actions by joint venture partners, suppliers, etc.

Although there is no prescribed format for reporting, there are recordkeeping requirements that apply to public companies. The recordkeeping provisions simply require that the company maintain adequate books and records so that it has reasonable assurance that the transactions are properly executed and recorded, in accordance with management’s instructions.

With regard to international partners, U.S. public companies may request that their foreign partners and suppliers meet the recordkeeping criteria in order to better ensure their own compliance. This process will result in a written record that clearly shows that the U.S. company did not authorize or have any knowledge of a violation, should one occur. As a best practice, U.S. companies should include in their supplier agreements specific references outlining the responsibilities and reporting requirements of the foreign agent. This would include a statement indicating that that the agent is aware of and compliant with the FCPA requirements and any other applicable U.S. and home country laws, as well as any periodic reporting requirements.

An FCPA guide is available from the Department of Justice and SEC, and it provides detailed information about the Act and related compliance.

Note that other countries have their own anti-bribery and anti-corruption laws.


1 H.R. Rep. No. 95-640, at 4-5 (1977)

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