Enforcement of Foreign Corrupt Practices Act (FCPA) Continues to Be High Priority

The recent news of FIFA officials being arrested and indicted for corruption sparked discussion about the Foreign Corrupt Practices Act of 1997 (“FCPA”). Although it is still debatable whether the FIFA related-action is an FCPA enforcement action or not, there is potentially exposure for certain companies who had business transactions with FIFA. So what exactly is the FCPA? The FCPA is a U.S. federal law which was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign officials to assist in obtaining or retaining business.

It essentially has two main provisions. The first addresses accounting transparency which requires covered corporations to make and keep books and records that accurately and fairly reflect the transactions of the corporations and create and maintain adequate internal controls for their accounting systems. The second provision addresses anti-bribery of foreign officials. The FCPA can apply to prohibited activities anywhere in the world and extends to public traded companies and their officers, directors, employees, stockholders and agents. Agents can include third party agents, consultants, distributors, join-venture partners and others. The recordkeeping and internal controls provision is primarily enforced by the Securities of Exchange Commission (“SEC”) and the anti-bribery provision is enforced by the U.S. Department of Justice (“DOJ”).

Enforcement of the FCPA continues to be a high priority area for the SEC and DOJ. While they both continue to prosecute individuals at a steady pace from past few years, the trend in 2014 and 2015 is the prosecution of corporate defendants. An increase of large corporation enforcement actions at the end of 2014 has generated the second highest corporation penalty total in history, despite the fact that the total number of corporation enforcement actions has remain about the same as 2013. As year to date of 2015, the SEC had four FCPA enforcement actions, three of which were related to corporate defendants. Some experts actually feel that the FCPA may be a new “international business taxes” for the non-U.S. companies.
There are resources to assist companies in getting their FCPA compliance policy and procedures in place. The DOJ and the SEC have stated the required elements of an adequate FCPA compliance program. Transparency International, a global civil organization whose mission is to lead the fight against corruption, has published guidance for companies to counter small bribes. The guidance includes principles which companies can follow, such as risk assessment process in order to design the strategy and program to eliminate small bribes, communication and training to provide to employees, the internal control accounting controls to counter small bribes, and continued monitoring the effectiveness of its program to counter small bribes, etc.

If you have any questions, please contact your WithumSmith+Brown professional, a member of WS+B’s International Services Group or email us at [email protected].

To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.