Corruption poses a profound economic and legal threat for international corporations that are engaging in business globally, especially in transitioning and developing countries. The US Securities and Exchange Commission and the United States Department of Justice is at the forefront in the fight against bribery (Dean, et al., 2012).According to Oslen (2015), the establishment of the two organizations has seen an increase in the number of investigations and the prosecution of persons and corporations that engage in corruption.
The Foreign Corruption Practices Act was established in 1977 to help in addressing the rampant corruption and bribery by American-based corporations that were doing business abroad. According to Grime et al. (2012), most of the American corporations admitted paying multi-billion bribes and kickbacks to government agencies and politicians abroad so as to land lucrative business deals. The FCPA was the first legislation to introduce corporate responsibility and liability for third parties. Also, the law is the most widely implemented anti-corruption legislation that enhances the prosecution of the corruption offenses that are committed beyond the borders of the United States.
The foreign corruption practices Act has provisions that require American and foreign companies listed in the US stock market to file their financial reports as directed by the Securities and Exchange Act of the 1934 (Dell’Osso, 2014).This legislation is the most progressive piece of regulation that not only applies to the citizens of the US but also affects foreign business entities, countries, and persons. The FCPA has set precedence for the business players in the world to be cognizance of the fact that ethical values and integrity of a corporation is an essential entity while engaging in any business transaction.
As noted by Abikoff et al. (2014) the FCPA has both the accounting requirements and anti-bribery provisions. The main essence of the accounting regulations is to deter accounting practices that are meant to conceal corrupt payments, Besides, the legislation is critical in ensuring that shareholders and the SEC have an accurate picture of a company’s financial position.
The foreign corruption Practices Act applies to all corporations and individuals that have direct formal ties with the US and those people who engage in the businesses while in the US. Both the United States “domestic concerns” and “issuer” have an obligation to obey the FCPA.Oslen (2015) opines that an “issuer” is any corporation that has registered its securities with the US or any company that is tasked with the responsibility of filing its periodic reports with the SEC.
According to Grime et al. (2012) the “domestic concern” encompasses a set of regulations that touches on the conduct of the US residents and citizens. This kind of “domestic concerns” also includes engagements that touch on partnerships, joint-stock company, unincorporated organizations, sole proprietorship, and business trust. This legislation has powers to investigate and prosecute US nationals and corporations who pay bribes to foreign government officials so as to influence business deals. Dean et al (2012) highlight that the PCPA can take actions on the corrupt entities even if such acts did not take place in the United States. In the recent past, the American enforcement agencies have prosecuted many foreign individuals and corporations for giving bribes to none American officials. Also, the legislation has the jurisdictions to deal with any foreign person perpetrating corruption acts while within the United States territory.
The violation of the foreign corruption practices Act is made up of five critical elements. Any individual or company is guilty of going against the FCPA if the US government can have evidence on the existence of the following conditions.
The FCPA prohibits the payment of bribes, authorization of corrupt deals or promises to pay kickbacks so as to influence business deals. Any corporation that pays money or any value directly to a government official or through a third party is liable. Secondly, the legislation has outlawed the payment of anything of value or money to foreign officials or any individual holding a foreign political office. Also, the violation of the Act entails the payment of any bribes to an official of any foreign international organization working in the United States.
The US government is also keen on persecuting individuals and corporate that uses instruments of commerce like the mail, telex or telephone in the furtherance of an offer or promising to pay money so as to influence business deals. This legislation is not only restricted to investigating communications that are used to further bribery acts in the US but also has powers to convict individuals who engage in corrupt business communication outsides the United states territory.
As noted by Dean et al. (2012) the FCPA prohibits the payment of bribes by American citizens or corporations for the purpose of influencing the decision during business engagements abroad. Also, the legislation has provisions that forbid the use of money to make a foreign official to violate his or her lawful duty or securing an undue advantage over other competitors. The use of kickbacks to induce the officials of the government to make biased decisions regarding American corporations is prohibited by the legislation. The payment or promise to pay anything of value to politicians and foreign government officials so as to retain business or securing a contract in an improper manner is highly prosecuted by the law.
Corporations and people who violate FCPA can be jailed for five years for the violation of each of the FCPA provisions or up to 20 years for the willful violation of specific provisions of the law. On the other hand, business entities and corporations may be fined up to two million US dollars for each of the offense violated. The FCPA prohibits corporations from using its resources in the payment of the civil and criminal fines that may be imposed on any of its officers on matters related to corruption. Organizations that engage in corruption may also face collateral consequences.
The anti-bribery legislation does not forbid facilitating payments. These forms of payments are meant to enhance routine operations of the corporation. For instance, the payments of utility bills, security, licensing and costs associated with the performance of a business entity. The main challenge to this provision is that the US government has not given clear guidance on what constitutes facilitating payment. It is also important to note that some of the facilitating payments may be unlawful depending on the laws of the country where the payments are made (Oslen, 2015).
The FCPA does not forbid payments that are clearly spelled under the written laws and rules of the foreign country where the payments are made. These payments include permissible payments to the government agencies for the purpose of licensing. However, any payment made so as to influence any corrupt actions is punishable by the law. Also, the FCPA has provisions that any person who can prove that the payments that were made are reasonable and bona fide will not be prosecuted. Nonetheless, the law does not protect persons who facilitate luxury and recreational lodging and travel expenses provided for the foreign government officials so as to influence business deals can form the basis for Foreign corruption policies act prosecution.
A study by Dell’Osso (2014) indicated that the FCPA provisions do not prohibit kickbacks paid to private and non-governmental organizations. The anti-bribery legislation only applies to the illegal payments made to foreign government or political officials. However, in the event that the commercial bribery is recorded in the books, the action may constitute the violation of the FCPA regulations.
The FCPA has imposed specific internal control and record-keeping regulations on the Ussuers.Primarily, these requirements compel the companies that trade on the US security exchange to keep accurate records and books. The accounting provisions of the FCPA are essentially enforced by the SEC.However; the US Department of Justice can lodge criminal proceedings against individual or corporation that circumvent the prescribed internal controls or falsification of the accounts, records or books. According to Abikoff et al. (2014), the reason for the establishment of a complementary provision to the anti-bribery act is because many corporations conceal payments made to foreign officials by describing the illegal payments as other transactions.
The FCPA has been the great influence in enhancing integrity and ethics in the international trade. This is because the legislation does not prosecute corrupt actions that are conducted in the united states but also deals with crimes committed outside the US .Also, the legislation has bee of great significance in creating a level field among various participants in the business by ensuring that individuals who obtain business deals through corrupt means face the full force of the law.
References
Abikoff, K. T., Wood, J. F., & Huneke, M. H. (2014). Anti-corruption law and compliance: Guide to the FCPA and beyond. Arlington, VA: Bloomberg BNA.
Dean, D.Z., Bloom, M. and Sean, K. (2012).Complying with the foreign corrupt practices: practical primer.Chicago: University of Chicago Press.
Dell’Osso, V. (2014). Empirical Features of International Bribery Practice: Evidence from Foreign Corrupt Practices Act Enforcement Actions. Preventing Corporate Corruption, 201-247. doi:10.1007/978-3-319-04480-4_10
Grime, R., King, I. M., Mendelsohn, M. F., & Practising Law Institute. (2012). The Foreign Corrupt Practices Act and international anti-corruption developments, 2012. New York, NY: Practising Law Institute.
Olsen, W. P. (2015). The Evolution of the Foreign Corrupt Practices Act. The Anti-Corruption Handbook, 27-34. doi:10.1002/9781119198451.ch5
