The Foreign Corrupt Practices Act – Part 2

January 03, 2012, 06:51 PM

The Foreign Corrupt Practices Act (FCPA) includes two primary components: (1) the anti-bribery provisions, and (2) the recordkeeping and internal controls provisions. This post will discuss the primary exception and affirmative defenses to the FCPA. The primary exception to the FCPA is called the facilitating payment exception. The anti-bribery provisions do not apply to any facilitating payment or expediting payment to a foreign official, political party, or party official the purpose of which is to expedite or to secure the performance of a routine governmental action. This exception is extremely limited and there is little guidance available in applying it to specific transactions. Nevertheless, it is important to note that if the payment does not qualify as a facilitating payment, recording the payment as such is a separate record keeping violation. When dealing with a FCPA violation, you should consider whether certain affirmative defenses are applicable. First of all, payments/gifts are permitted if they are lawful under the written laws and regulations of the foreign officials country. This defense only applies to laws that render the bribe itself legal (not simply legal amnesty to a defendant). Also, there is an affirmative defense for reasonable and bona fide expenditures incurred by or on behalf of a foreign official directly related to the promotion, demonstration, or explanation of products or services or to the execution or performance of a contract with a foreign government or agency. Once you and your attorney have determined that a certain expense qualifies as a reasonable and bona fide expenditure, the following are recommended best practices:

  • Only pay for the expenditures of the government official (not family members)
  • Do not request a specific visiting government official
  • Pay costs directly to service providers
  • Do not provide officials with cash or spending money
  • Souvenirs should have nominal value
  • Do not fund non-business related activities