Foreign Corrupt Practices Act (FCPA)

The Foreign Corrupt Practices Act (FCPA) is a US federal statute that prohibits US persons, US companies, and foreign issuers of US-listed securities from paying, offering, or authorising anything of value to a foreign government official to obtain or retain business or a business advantage, with parallel accounting and record-keeping requirements that apply to public companies.

What is the Foreign Corrupt Practices Act (FCPA)?

Enacted in 1977 and strengthened over subsequent decades, the FCPA has two sets of provisions. The anti-bribery provisions prohibit corrupt payments to foreign officials by US persons and entities, foreign companies with US operations, and foreign companies or individuals who take any step in furtherance of a corrupt payment within the United States. The accounting provisions require issuers of US-registered securities to maintain accurate books and implement adequate internal accounting controls, making it harder to disguise bribe payments as legitimate expenses.

The FCPA's extraterritorial reach is extensive. A non-US company that routes a payment through a US bank, uses a US email server, or has a US subsidiary involved in the transaction can fall within FCPA jurisdiction. The US Department of Justice and SEC enforce the FCPA jointly. FCPA penalties include criminal fines, disgorgement of profits, and individual imprisonment. Many of the largest FCPA settlements have involved infrastructure, construction, and energy companies operating in markets with significant mdb-financed procurement.

Why FCPA matters for bidders

Any company with US operations, US-listed equity, US investors, or contracts funded through US-nexus financing needs an FCPA compliance programme. The practical risk points in procurement are: using agents or consultants to facilitate government relationships without knowing their exact activities; joint ventures with local partners in high-corruption-risk markets; and providing hospitality or gifts to procurement officials that cross the threshold from legitimate business entertainment to improper inducement. The FCPA does not contain a facilititation-payment exemption outside a very narrow category of routine non-discretionary actions, and the SEC takes a strict view of what is routine.

FAQ

Does the FCPA apply to companies headquartered outside the United States?

Yes, in several scenarios: if the company is listed on a US exchange, if it takes any act in US territory in furtherance of the corrupt payment, or if it is an agent or subsidiary of a US issuer. The extraterritorial reach has been applied by US courts broadly.

Is the FCPA stricter than the UK Bribery Act?

Both are among the world's most stringent anti-bribery laws, but they differ. The uk-bribery-act covers commercial as well as government bribery, applies to all UK-nexus entities, and has no facilitation-payment exemption at all. The FCPA is limited to foreign government officials but is enforced more aggressively in terms of case numbers and penalty sizes.

What books and records must a company maintain for FCPA purposes?

Public companies subject to the accounting provisions must keep books that accurately reflect all transactions and maintain a system of internal controls sufficient to ensure that transactions are properly authorised, recorded, and reported. This means that payments to agents, consultants, and third parties related to contract-winning activities must be documented and traceable.