Enforced by both the U.S. Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DOJ), the Foreign Corrupt Practices Act of 1977 forbids companies from making corrupt payments — in the form of gifts, trips, lavish treatment, as well as money — to foreign officials to obtain or retain business.
The United States Congress enacted it to restore public confidence in the integrity of the marketplace after widespread revelations of U.S. companies bribing foreign officials,and this action set a pivotal precedent.
The U.S. Foreign Corrupt Practices Act, along with the U.K. Anti-Bribery Act, laid the groundwork for ABAC laws now on the books in 46 jurisdictions worldwide.
The Foreign Corrupt Practices Act applies to all U.S. citizens and businesses and any public company listed on a U.S. stock exchange or required to file periodic reports with the SEC. Certain foreign individuals and businesses operating in the U.S. may also fall under the Act’s jurisdiction.
This is just the beginning of the FCPA’s reach. Not only are organizations liable for their own employees’ behavior, but they can also be held accountable if a third party attempts to bribe public officials while acting on their behalf.
In short, the FCPA aims to create a level playing field for global commerce.
A National Law Review article from 2020 calls it “an invaluable tool” in the fight against corruption and for a fair business environment, noting how the Act and other anti-bribery/anti-corruption laws:
As stated earlier in this article, the significance of the FCPA extends far beyond the U.S. boarders. The FCPA has not only been a cornerstone in the U.S. legal framework against corruption but has also served as a model for ABAC laws worldwide. Its influence is profound, shaping the legislative landscapes of numerous countries and demanding a global culture of transparency and integrity in business practices.
The FCPA was one of the first laws to address corruption and bribery of foreign officials on an international scale, setting a precedent for others to follow. In the years following the FCPA’s implementation, several countries have established or strengthened their own ABAC laws. For instance, the U.K. Bribery Act, which came into effect in 2010, mirrors the FCPA’s provisions but includes stricter penalties and a wider scope of application. Similarly, countries like Brazil, China and India have also revamped their anti-corruption efforts, inspired by the FCPA’s framework.
These laws are not mere replicas but are tailored to fit the unique legal and cultural contexts of each country. However, the core principles of fairness, accountability and transparency remain consistent, echoing the foundational goals of the FCPA.
The proliferation of ABAC laws influenced by the FCPA has significantly impacted international business operations. Companies operating across global markets are now more accountable for their actions and the actions of those they do business with, including third parties and intermediaries. This heightened accountability has compelled businesses to implement robust compliance programs that ensure adherence not only to the FCPA but also to the myriad of international laws that govern their operations.
Moreover, the FCPA’s emphasis on accurate record-keeping and financial transparency has become a global norm, encouraging companies to maintain detailed and transparent accounting practices.
As regulators, enforcers, and corporations alike navigate these complexities, here are two of the top themes we’re seeing.
Expectations for FCPA compliance are high. As the intensified enforcement activity of recent years demonstrates, internal controls are just the beginning of what the DOJ wants to see. They expect internal controls to be part of an overall culture of FCPA compliance throughout the organization, set from the top by senior management.
Meanwhile, the scope is broad, and growing more so by the day. The DOJ also expects organizations to allocate greater resources and due diligence to areas of higher risk — across its own operations and those of third parties.
Due diligence is an involved and ongoing process including risk assessment and classification, investigations, resolution of red flags, and continuous monitoring.
Now multiply these steps across the many parties that make up a modern third-party network: vendors, outsourcers, service providers, contractors, subcontractors, consultants, temporary workers, agents, brokers, dealers, intermediaries, partners, and more.
Especially as recent SEC and DOJ guidance prioritizes third party oversight, investment in the right risk management solution can pay dividends in terms of time savings, fine avoidance, and peace of mind.
A solution like Third-Party Risk Management, delivered over the Diligent One Platform, keeps compliance leaders ahead of FCPA adherence by automating manual processes, streamlining vetting and monitoring consolidating information into a single, secure, and auditable system, and more.
Download our guide to creating a credible, defensible third-party risk management program, to get ahead of Foreign Corrupt Practices Act regulation and enforcement in 2024 and beyond.
