The FCPA Explained
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The FCPA Explained


The Foreign Corrupt Practices Act of 1977, otherwise known as the FCPA, is a piece of anti-bribery legislation enacted by the 95th United States Congress.

This law bans U.S. citizens, residents and companies from issuing bribes to foreign government officials and civil servants in order for them “to assist in obtaining or retaining business”. This law is applied worldwide and extends to all personnel involved regardless of official title or ranking.

In 1998, further amendments were created in order for the Act to apply to foreign firms and persons who aid in the realisation of corrupt payments in American territory. The FCPA is enforced by both the United States Department of Justice and the United States Securities and Exchange Commission.

Corruption is an issue that all industrialised countries face, and the United States is at the forefront in its eagerness to deter such matters by the implementation of the FCPA that promotes the values of justice, transparency and equality of opportunity.

According to the World Bank, “businesses and individuals pay an estimated $1.5 trillion in bribes – the rough equivalent of two percent of global GDP—and a staggering ten times the value of overseas development assistance” every year.

The FCPA not only helps to limit this statistic but also generates “significant funds for the U.S. Treasury”. In 2016, the American government received over $2.4 billion in penalties charged with FCPA violations. However, there has been certain controversy surrounding this particular bill and its consequences in the international market.

There are those that claim that the benefits of the FCPA are exaggerated as it leaves “American companies at a competitive disadvantage”. One of the most forthright critics, former American President Donald Trump, even led many to question the future of the Act.

The disadvantage mentioned above is essentially the money that could be made between American businesses and emerging market countries (EMCs) which cannot be obtained due to the FCPA legislation.

These EMCs include Brazil, Russia, India and China (also known as the BRIC countries). Glenn Pomerantz, a partner of leading professional services firm, BDO Global, explains that the FCPA prevents U.S. corporations from investing time or resources in EMCs due to a “confluence of circumstances which makes corruption risk greater”. He explains that “industries, such as healthcare, oil & gas, and textiles, among others, which are privately owned in the United States and in Western Europe, are owned or controlled by the state” and that “many of the [EMCs] have a history of controlling governments, with little transparency, which fostered a culture of corruption”.

Therefore, this makes deals with these countries more difficult to realise as the risk of an FCPA issue being unmasked is high. Pomerantz admits that “there is no doubt that deals have been both terminated or, more often, renegotiated as a result of an FCPA issue” which, over time, can result in missed opportunities for major U.S. enterprises.

Fortunately, these concerns have been noted by the major players in FCPA enforcement. Mark Mendelsohn of Paul, Weiss, et al LLP, an FCPA expert who served as deputy chief of the Fraud Section of the DOJ’s Criminal Division from 2005-2010 explains that although the U.S. commitment to the FCPA legislation remains, “we could see some adjustments at the margins [of FCPA enforcement] that could be significant for companies operating global businesses”.

So, although efforts to combat worldwide corruption remain solid, there is hope that the United States have no desire to allow their laws to obstruct progress in the corporate sphere.



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