Foreign Corrupt Practices Act

Definition

The Foreign Corrupt Practices Act is a federal law enacted in 1977 to prohibit companies from paying bribes to foreign government officials and political figures for the purpose of obtaining business. Enforcement of the regulation has increased dramatically in the past three years.

There are two provisions to the Foreign Corrupt Practices Act: The anti-bribery provisions, which are enforced by the Department of Justice; and the accounting provisions, which are enforced by the Securities and Exchange Commission.

There are three types of entities prohibited from making improper payments.

These are:

  • Issuers
  • Domestic concerns
  • Foreign nationals and businesses

Issuers

Companies that have securities registered in the U.S. or are required to file reports with the Securities and Exchange Commission are considered issuers.


Domestic concerns

Any person or business entity, as well as nationals and residents of the U.S. are considered domestic concerns. This includes any entities who have their principal place of business in the U.S. or who are organized under the laws of the U.S. Both issuers and domestic concerns may be held liable for any act that promotes a corrupt payment, by using the U.S. mail or any means or instrument of interstate commerce or for an act which occurs outside of the U.S.

Foreign nationals and businesses

A foreign national or business may be held liable for any act that promotes a corrupt payment within the U.S. Unlike the first two entities, foreign nationals and businesses are not liable for acts committed outside of the U.S.

Third parties and agents

A third party or agent acting on behalf of an issuer, domestic concern or foreign national or business is liable under the same conditions as the issuer, domestic concern or foreign national or business