Foreign Corrupt Practices Act

What is the Foreign Corrupt Practices Act?

Foreign Corrupt Practices Act (FCPA) is a law made in the United States which provides provisions to stop the business persons from making payments in the form of bribes to the officials of a foreign government with the intent to secure business through such dealing.

FCPA was enacted in 1977 and further requires the entities to maintain sufficient books of accounts along with an assurance of internal controls. Such controls will provide reasonable assurance about the execution of transactions in a lawful manner, assessment of assets and accounting done through authorisation from the management.

Purpose

Requirements of Foreign Corrupt Practices Act

Provisions of the Foreign Corrupt Practices Act

FCPA has two main provisions –

Foreign Corrupt Practices Act

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#1 – Anti-bribery

This provision provides a ban/prohibition on payment of bribes to foreign officials in the form of money or any monetary value or anything of value, with the intent of acquiring a business or retaining an existing business.

This provision requires the corporate players to maintain appropriate & adequate “books and records”. These words have been defined under the act with sufficient care. This provision further requires the corporate players to maintain internal controls over the financial records.

Violating the Foreign Corrupt Practices Act

Violation of the Foreign Corrupt Practices Act has serious repercussions on the persons involved in the payment of bribes or any other provision of the act.

  • Individuals involved in the case may be charged with imprisonment up to 5 years in respect of each violation in the nature of anti-bribery provisions. Such individuals may be imprisoned for up to 20 years in case the violation is proven to be a willful act. Further, the said individual is fined up to $ 1 lac for the involvement in the violation.
  • Companies are corporate persons with a corporate veil. Companies are artificial persons & cannot be imprisoned. Hence, to make the punishment in line with punishments imposed on the individuals, the companies are fined up to $ 2 Million for each violation.
  • Every act may specify the increasing quantum of penalties to be imposed. The FCPA has a provision which states that the said fine may be increased up to $25 million in case of corporate persons and up to $5 million in case of individuals involved in the case. Such penalties may be small in quantum for a corporate entity flourished with cash reserves. For such a situation, the Alternative Fines Act comes into play which doubles the penalty amount in case of criminal fines. However, proving the act of bribery as a criminal act is the task of lawyers of Government.
  • The FCPA is so strict that it restricts the companies to pay fines for its officers, employees, directors, agent, etc. Thus, the act requires them to pay from their pocket. Further, the individuals, as well as corporations, have proven to be guilty under this act may be debarred from certain benefits available normally under any government scheme. Such benefits may be obtaining export licenses, participation in federal programs, operating under the securities law board, etc.
  • Violation under FCPA may be considered as civil or criminal action under the RICO Act (i.e. Racketeer Influenced and Corrupt Organisations Act).

Applicability

Applicability confirms the extent of the act to different persons. The Foreign Corrupt Practices Act applies to as follows:

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