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Foreign Corrupt Practices Update: “A Resource Guide to the U.S. Foreign Corrupt Practices Act, Second Edition (2020)”

Written by: John E. Parkerson, Jr., Esq.

Individuals and companies that currently or plan in the future to conduct cross-border business need to be knowledgeable about the US Foreign Corrupt Practices Act (“FCPA”) and its anti-bribery and accounting requirements.  Hall Booth Smith’s international business attorneys routinely assist clients with advice to help them to comply with FCPA obligations – whether in their business activities and communications, or by ensuring their transactions include safeguards intended to reduce the client’s risks, or actual design of corporate compliance programs tailored for the particular client’s business (see https://hallboothsmith.com/your-clients-compliance-obligations-regarding-foreign-corruption-2/).

As a background “refresher,” you may recall that the Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”) share FCPA enforcement authority and are committed to fighting foreign bribery through robust enforcement.  Also recall that the FCPA contains both anti-bribery and accounting provisions. The anti-bribery provisions prohibit U.S. persons and businesses (domestic concerns), U.S. and foreign public companies listed on stock exchanges in the United States or that are required to file periodic reports with the SEC (issuers), and certain foreign persons and businesses acting while in U.S. territory (territorial jurisdiction) from making corrupt payments to foreign officials to obtain or retain business. The accounting provisions require issuers to make and keep accurate books and records and to devise and maintain an adequate system of internal accounting controls. The accounting provisions also prohibit individuals and businesses from knowingly falsifying books and records or knowingly circumventing or failing to implement a system of internal controls.

FCPA obligations might appear daunting to many individuals and businesses, and potential punishments for violations are severe.  As a compliance aid, the Criminal Division of DOJ and the Enforcement Division of SEC published this year its second edition (the first edition was in 2012) of “A Resource Guide to the U.S. Foreign Corrupt Practices Act, Second Edition” (the “Guide”) https://www.justice.gov/criminal-fraud/file/1292051/download.  The Guide, which is a non-binding statement of the  Division of Enforcement’s views, provides a fresh update for businesses and individuals regarding the FCPA, thereby supplying those businesses and individuals with information to help them abide by the law, detect and prevent FCPA violations, and implement effective compliance programs.  The Guide provides the best resource available on the subject aside from the FCPA itself (The Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. §§ 78dd-1, et seq.) https://www.justice.gov/sites/default/files/criminal-fraud/legacy/2012/11/14/fcpa-english.pdf.  As an additional resource, DOJ maintains a website dedicated to the FCPA and its enforcement https://www.justice.gov/criminal/fraud/fcpa.

The Guide not only provides detailed information about the FCPA’s statutory requirements; but it also provides insights into DOJ and SEC enforcement practices through hypotheticals, examples of enforcement actions and anonymized declinations, and summaries of applicable case law and DOJ opinion releases.  For example, this 2020 edition updates the 2012 guide by including new case law on the definition of the term “foreign official” under the FCPA, the jurisdictional reach of the FCPA, and the FCPA’s foreign written laws affirmative defense.  It addresses certain legal standards, including the mens rea requirement and statute of limitations for criminal violations of the accounting provisions.  It reflects updated data, statistics, and case examples.  Further, it summarizes new policies applicable to the FCPA that have been announced in the DOJ’s and SEC’s continuing efforts to provide increased transparency.

The Guide contains in-depth discussion of the bribery prohibition’s narrow exception for “facilitating or expediting payments” made in furtherance of “routine governmental action that involves non-discretionary acts.”  As one might imagine, those terms are difficult to interpret with any degree of precision, and U.S. enforcement authorities define them narrowly.  The Guide provides numerous hypotheticals and examples that assist individuals and companies in determining what might constitute a legal versus non-legal facilitation payment.  Finally, it also points out particular risks in international M&A transactions; successor liability; FCPA application in situations of aiding, abetting and conspiracy; corporate responsibilities for company officers’ and employees’ acts; statutes of limitation and potential punishments; required accounting procedures; benefits from self-reporting; and elements of an effective corporate compliance program.

Individuals and companies must heed these anti-bribery and accounting provisions.  Non-compliance is actively enforced.  In cases of doubt, we highly recommend consultation with knowledgeable legal counsel.