The Foreign Corrupt Practices Act and the UK Bribery Act are two of the most important anti-bribery laws aimed at preventing corruption worldwide.
Organizations of any size that conduct business overseas or have foreign partners must comply with the FCPA and, where appropriate, require their agents and partners to do so.
A Brief History of the FCPA and the UK Bribery Act
In the early 1970s, when public trust had already been shaken by the Watergate scandals, investigations by the Securities and Exchange Commission revealed that many US corporations were holding special slush funds for the bribe of foreign officials. According to a congressional report, more than 400 corporations admitted to making illegal or questionable payments to foreign officials totaling over $300 million (or $1.2 billion in 2015 dollars).
In response to these shocking revelations, Congress passed the Foreign Corrupt Practices Act (FCPA) in 1977, prohibiting American businesses or individuals from bribing foreign officials to conduct, conduct, or conduct business. In its report on the FCPA, Congress explained:
Paying bribes to influence the actions or decisions of foreign officials, foreign political parties, or candidates for foreign political office is unethical. It runs counter to the moral expectations and values of American society. Not only is it unethical, it’s also bad for business. It undermines public trust in the integrity of the free market system.
Today, the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) jointly enforce the FCPA. Together, they have led to an increase in FCPA enforcement actions, charging violators with both civil and criminal offenses. According to attorney F. Joseph Varin, 2016 «was arguably the most significant year of enforcement in the law’s 39-year history.» The US Securities and Exchange Commission and the Department of Justice have filed 53 lawsuits against companies and imposed fines totaling over $2 billion.
The relationship between corporate culture and corporate reputation.
Reputation protection efforts fail when compliance programs fail to address ethical issues at the cultural level.
Since the passage of the FCPA in 1977, the global market has been governed by a growing number of laws and regulations aimed at preventing corruption. In addition to the FCPA, organizations doing business overseas may be subject to the laws of other countries.
Of particular note is the UK Bribery Act 2010, which applies to UK companies and individuals. The UK Bribery Act provides harsher penalties and is broader in scope than the FCPA.
Penalties for Violating Anti-Bribery Laws
Penalties for violating the FCPA or the UK Bribery Act are significant. Both individuals and corporations can be held liable.
Under the FCPA, individuals who violate the FCPA’s anti-bribery provisions can be subject to criminal and civil penalties, up to five years in prison, and disqualification from doing business with the federal government or engaging in securities-related activities.
Companies can face fines of up to $2,000,000 and disqualification from doing business with the government, engaging in securities-related activities, or losing their export licenses. There are additional, significant penalties for violating accounting regulations.
Under the UK Bribery Act, individuals or companies can face up to 10 years in prison or unlimited fines.
The importance of training employees on anti-bribery laws.
Given the complexity and potential consequences of violating anti-bribery laws, it is crucial that your organization have compliance programs in place to prevent corruption when doing business overseas.
Both the Department of Justice and the SEC consider an organization’s compliance program when deciding whether to initiate an investigation or bring charges under the FCPA.
According to the FCPA Resource Guide, «in appropriate circumstances, the Department of Justice and the SEC may decline to charge a company based on its existing compliance program…even if that program failed to prevent the specific FCPA violation that gave rise to the investigation.»
Similarly, companies can defend themselves against charges under the UK Bribery Act if they can demonstrate that they had appropriate procedures in place to prevent bribery.
Additionally, the Department of Justice’s Fraud Section released the «Evaluating Corporate Compliance Programs» (ECCP), which lists «critical topics and common questions» to help companies evaluate their compliance programs.
Train your employees! Training is a hallmark of an effective compliance program. It helps reinforce organizational values, implement anti-corruption policies, educate employees about relevant laws and best practices, and ensure that employees understand how to act in accordance with these values, policies, and practices.