The Foreign Corrupt Practices Act- Part 3

    February 27, 2012, 06:50 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 recordkeeping and internal controls provisions, which prohibits the false characterization of payments. The purpose of the FCPA is to prevent a company from hiding bribes and other improper transactions. However, the recordkeeping and internal controls provisions apply no matter if the record is linked to bribery of a foreign official or not. In addition, there is no minimum dollar amount that triggers the FCPA: from $1.00 to $1 million, your recordkeeping must accurately reflect the transaction. The recordkeeping and internal controls provisions of the FCPA require all issuers–all companies with securities traded on a U.S. exchange or which are otherwise required to file periodic reports with the Securities and Exchange Commission– to maintain records and accounts that accurately reflect the companys transactions. To facilitate this requirement, companies must maintain internal accounting controls sufficient to provide reasonable assurance that financial statements are accurate. Reasonable assurance requires the level of detail and degree of assurance as would satisfy prudent officials in the conduct of their own affairs. Although such a standard may be somewhat vague, one thing is for certain: internal controls in your accounting department are a must. Your company should consider implementing written guidelines and a checks and balances system that encourages accountability among employees. In addition, internal controls will help companies avoid violating the FCPA and incurring the penalties that come along with such a violation. On the civil side, a business can be fined up to $500,000 and a criminal fine can be up to $25 million. An individual can also be fined civilly $100,000 and $5 million for a criminal fine, neither of which can be paid by a company on whose behalf the individual acted. Written policies and procedures that are adhered to and regularly enforced can help protect a company from these expensive violations.