Foreign Corrupt Practices Act (FCPA) is the primary piece of legislation in the U.S. that illegalizes the bribing of foreign officials by U.S. citizens and employees of U.S. listed companies. The FCPA consists of two main provisions; one directly outlaws the bribery of foreign officials and the other mandates new accounting transparency requirements under the Securities Exchange Act of 1934. Breach of either provision can lead to heavy fines, and conviction for corrupt acts can lead to criminal charges.
The FCPA broadly prevents the bribery of foreign officials by U.S. citizens and companies. The provision covers any act that gives anything of value, by using the mail systems or instruments of interstate commerce in the U.S., to influence the acts of foreign officials, political parties, candidates, or people who will give the resources to such officials. There are exceptions for facilitating payments to officials like for getting a business license. This part of the FCPA is extremely broad and controversially can apply to people outside of the U.S. that do not have connections with U.S. companies. For example, an executive of a company based in France directs their company to make a payment to an official in Columbia to ensure the company receives a lucrative government contract; the executive could be charged under the FCPA if this payment goes through a correspondent bank in the U.S., even though the company’s bank is in France. These types of situations frequently occur that fall under the banking system of the U.S. and can be used to expand the application of the FCPA to foreign entities and individuals.
The FCPA also contains a mandatory accounting provision that tries to help prevent bribery by U.S. listed firms through limiting the ability for corrupt transactions to remain hidden. This provision essentially mandates regularly compiled book keeping, internal controls, and compliance mechanisms that can prevent resources from being used corruptly.
Additional Resources
- 15 U.S. Code § 78dd - Foreign Securities Exchanges
- 15 U.S. Code § 78dd–1 - Prohibited Foreign Trade Practices by Issuers
- SEC Spotlight on Foreign Corrupt Practices Act
- SEC Enforcement Actions: FCPA Cases
[Last updated in December of 2022 by the Wex Definitions Team]