QuickCounsel

Foreign corrupt practices act, and the OECD COnvention on Combating Bribery of Public Officials in International Business Transactions

Overview FCPA      Anti-Bribery Provisions      Accounting Provisions OECD Convention Compliance And Due Diligence Additional Resources Rate this QuickCounsel

Overview

Most countries have laws that prohibit the bribery of government officials. Anti-bribery laws can be either local in nature or “global.” The latter laws target behavior which relates to bribery outside the country’s borders. Two important global anti-bribery acts to be aware of when doing cross-border business are the Foreign Corrupt Practices Act ("FCPA") and the Organization for Economic Cooperation and Development’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions ("OECD Convention").

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FCPA

The FCPA of the United States has two basic sets of provisions: the anti-bribery provisions and the accounting provisions. The FCPA is both a criminal and civil statute.

The FCPA covers not only direct payments made by the covered person to a foreign official, but also indirect payments, i.e., payments to any person while knowing that all or a portion of that payment will be offered or given to a foreign official.

An increase in voluntary disclosures under the FCPA may be attributed to the Sarbanes-Oxley Act, Section 302, which, among other provisions, requires CEOs and CFOs to take responsibility if there are errors in periodic filings with the SEC. This has led to heightened scrutiny of companies’ books, bringing greater attention to potential violations.

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Anti-bribery Provisions

Prohibit improper payments to, or other improper transactions with, non-U.S. government officials to influence the performance of their official duties. The violator can be a domestic U.S. concern, an “issuer” who files with the SEC or a foreign company or national whose act in furtherance of corruption takes place in the U.S.

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Accounting Provisions

Require U.S. companies and their majority-owned affiliates to keep accurate and complete records of the transactions in which they engage, and also mandate that those companies make good faith efforts to cause their minority-owned ventures to do the same. Even where there has been no violation of the anti-bribery provisions, a company can be prosecuted under the FCPA for violation of the accounting provisions.

The U.S. Department of Justice is responsible for all criminal enforcement and for civil enforcement of the anti-bribery provisions with respect to domestic concerns and foreign companies and nationals. The SEC is responsible for civil enforcement of the anti-bribery provisions with respect to issuers - companies that have securities registered with the SEC pursuant to the Securities Exchange Act of 1934 (essentially, all publicly held companies in the U.S., and any foreign companies listed on the U.S. stock markets).

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OECD Convention

The United States' major trading partners have enacted legislation similar to the FCPA. The OECD Convention requires signatory countries to enact national laws criminalizing bribery of foreign government officials.

The Convention sets forth criteria that anti-bribery laws need to meet, and these criteria generally mirror the FCPA's anti-bribery provisions. As of March 2009, 38 countries have signed the Convention, including the U.S., The United Kingdom, Canada, Korea, Japan, and most European nations. The U.S. amended the FCPA to bring it into compliance with the OECD Convention.

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Compliance and Due Diligence

Companies doing business or contemplating doing business in countries other than their home country, who might be covered by either of these laws, or other anti-corruption conventions (such as those of the Organization of American States., the United Nations and the European Union), as well as foreign domestic laws, need to have in place effective anti-corruption compliance programs. An effective compliance program will reduce the risk of violations and may aid the defense of any enforcement action in the event a violation does occur.

Areas that invite special scrutiny with regard to potential bribery issues include due diligence of foreign business partners and agents, as well as foreign merger and acquisition targets, especially those operating in countries known for their high levels of corruption. Countries that have many state-owned enterprises (or companies partly owned by the state) should also raise red flags because the local party running such a business may be considered a “government official.” Attention should be paid to travel and other miscellaneous expenses for potential violations.

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Additional Resources

ACC Resources

Other Resources

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The information in this QuickCounsel should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or the ACC. This QuickCounsel is not intended as a definitive statement on the subject addressed. Rather, it is intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.

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Published January 12, 2010

Reprinted with permission from the Association of Corporate Counsel
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