Page 349 - Encyclopedia of Business and Finance

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Foreign Corrupt Practices Act of 1977

ACCOUNTING PROVISIONS ing the inquiry. The objective is to alleviate uncertainty
The accounting provisions require companies to “keep regarding acts covered by the FCPA.
books and records, and accounts, which, in reasonable
detail, accurately and fairly reflect the transactions and PENALTIES
dispositions of assets.” The purpose of this accounting The FCPA provides penalties for violations. Criminal
provision is to make it difficult for organizations to “cook penalties for bribery violations include fines of up to $2
the books” or use slush funds to hide any corrupt pay-
million for firms; fines of up to $100,000 and imprison-
ments. Representative means for transfer of corrupt pay-
ment of up to five years for officers, directors, and stock-
ments included:
holders; and fines of up to $100,000 for employees and
• Overpayments agents (fines imposed on individuals cannot be paid by
companies). The SEC or attorney general may also bring
• Missing records (no receipt)
actions that lead to civil penalties. Also, the act’s penalties
• Unrecorded transactions do not supersede penalties or fines levied under the provi-
• Misclassification of costs (bribes recorded as consult- sions of other statutes. A violation of the bribery provi-
ing fees or commissions) sions of the FCPA may give rise to a private cause of
action for treble damages under RICO (Racketeer Influ-
• Retranscription of records
enced and Corrupt Organizations Act).
The accounting provisions include a requirement The penalties can have long-term ramifications for
that companies design and maintain adequate systems of companies. For example, a company found guilty of vio-
internal accounting controls that provide reasonable lating the FCPA may be barred from doing any business
assurance that: with the federal government. A company indicted for an
FCPA violation may not be eligible to obtain various
• Transactions are executed in accordance with man- export licenses.
agement’s authorization
• Transactions are recorded as necessary
COMPLIANCE
• Access to assets is permitted only in accordance with
Clearly, large multinational corporations cannot monitor
management’s authorization
every transaction of every dollar amount by every
Any internal document that misrepresents the actual employee. However, companies do have a due-diligence
nature of a financial transaction could be used as the basis obligation to implement adequate systems with sufficient
for a charge that the “books and records” section of the internal controls. Key ways to avoid violation and liability
FCPA has been violated. include establishing policies and procedures that provide
reasonable assurance that the business is adhering to the
act’s provisions. Suggested due-diligence steps for compli-
ENFORCEMENT
ance with the FCPA include the following:
Enforcement of the act is shared. Civil and criminal
enforcement of the bribery provisions for those not • Utilizing the compliance program under the Corpo-
required to file with the SEC rests with the Department rate Sentencing Guidelines Act
of Justice. Responsibility for civil enforcement of the • Performing a risk evaluation of locations known for
bribery provisions for those who have SEC filing require-
unethical business practices
ments rests with the SEC.
• Performing risk evaluation of employees/agents who
In 1988 the FCPA was amended to allow for “facili-
operate out of the home country
tating payments” for expediting routine governmental
action. These payments are distinguishable from corrupt • Assuring that personnel who work out of the home
payments in that these “grease payments” are for facilitat- country are knowledgeable regarding the provisions
ing the performance of officials who are obligated to per- of the FCPA
form said duties. Questions regarding this amendment, • Assessing internal controls to be assured they are
affirmative defenses, or other provisions of the FCPA sufficient
should be directed to counsel, or companies may wish to
• Monitoring internal controls, including reviews by
use the Department of Justice’s Foreign Corrupt Practices
Act Opinion Procedure. Under this procedure, upon auditors
receiving a question from a company or individual, the • Reviewing critical transactions, such as those related
attorney general has thirty days to issue an opinion regard- to consulting services

326 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION