Don’t Forget About Your FCPA Risk Factor

The Foreign Corrupt Practices Act (FCPA) is back in the news.  The Securities and Exchange Commission has a specialized unit established to enhance the SEC’s enforcement of the FCPA, and the SEC reports that it has brought more than 30 FCPA enforcement actions since the start of 2010.  Moreover, as my colleagues Shawn M. Wright and James R. Billings-Kang recently wrote in The National Law Journal, the United States Department of Justice has over 150 open FCPA investigations and together the SEC and the DOJ netted approximately $1.8 billion in fines, penalties and disgorgement of profits in 2010 alone for FCPA violations. 

Generally, the FCPA covers, among others, any company with securities registered under the Securities Exchange Act of 1934 and any company that is required to file reports under the Exchange Act or has its principal place of business in the United States.  The anti-bribery provisions of the FCPA prohibit corrupt payments to foreign officials for the purpose of procuring or maintaining business.  The FCPA is extremely broad in its scope and determining exactly what is prohibited by the FCPA can be very difficult.  Because the FCPA makes illegal many payments that individuals working in countries other than the United States may consider ordinary or customary, it can be particularly difficult to put a stop to the sorts of payments that may be covered by the FCPA, even where a company has a robust training and compliance program. 

If your company has significant operations outside the United States, especially where those operations are in countries where unofficial payments or gifts are a regular part of the business culture, a risk factor about your company’s FCPA exposure is likely to be warranted.    

 

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