Foreign Corrupt Practices

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A brief primer on the US Foreign Corrupt Practices Act (FCPA), including Red Flags for exporters.

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Foreign Corrupt Practices

  1. 1. The U.S. Foreign Corrupt Practices Act Thomas O’Dea VP International Sales March 15, 2010
  2. 2. 5 Elements <ul><li>Five elements must be met to constitute a violation of the act: </li></ul><ul><ul><li>Who (is acting) </li></ul></ul><ul><ul><li>Corrupt Intent </li></ul></ul><ul><ul><li>Payment </li></ul></ul><ul><ul><li>Recipient </li></ul></ul><ul><ul><li>Business Purpose </li></ul></ul>
  3. 3. 1. Actor <ul><li>Individual, firm, officer, director, employee, agent or any stockholder acting on behalf of a firm </li></ul><ul><ul><li>Individuals and firms may be penalized if they order, authorize or assist someone else to violate the anti-bribery provisions or if they conspire to violate those provisions </li></ul></ul>
  4. 4. 2. Corrupt Intent <ul><li>Inducing a foreign official to do or omit to do any act in violation of his or her lawful duty to obtain improper advantage </li></ul><ul><li>To induce a foreign official to use his or her influence to affect or influence any act or decision </li></ul><ul><ul><li>Attempt does not have to be successful </li></ul></ul>
  5. 5. 3. Payment <ul><li>Paying or offering to pay (or authorizing to pay or offer) money or “anything of value” </li></ul>
  6. 6. 4. Recipient <ul><li>Foreign official </li></ul><ul><li>Foreign political party </li></ul><ul><li>Candidate for foreign political office </li></ul><ul><li>Public international organization </li></ul><ul><li>Any person acting in an official capacity for a foreign government </li></ul>
  7. 7. <ul><li>Obtaining or retaining business </li></ul><ul><li>Directing business to any person </li></ul>5. Business Purpose
  8. 8. Intermediaries <ul><li>Unlawful to make a payment to a third party while knowing that all or a portion is going to a foreign official </li></ul><ul><ul><li>Includes “conscious disregard and deliberate ignorance” </li></ul></ul><ul><li>Intermediaries include: </li></ul><ul><ul><li>Agents, partners </li></ul></ul>
  9. 9. Due Diligence <ul><li>To avoid being held liable, U.S. companies are encouraged to exercise due diligence: </li></ul><ul><ul><li>Investigating potential partners and agents </li></ul></ul><ul><ul><li>References and reputation </li></ul></ul><ul><ul><li>Banking information </li></ul></ul>
  10. 10. Red Flags <ul><li>Unusual payment or financial arrangements </li></ul><ul><li>History of corruption in the country </li></ul><ul><li>Refusal to provide FCPA certification </li></ul><ul><li>Unusually high commission </li></ul><ul><li>Lack of transparency in accounting records </li></ul><ul><li>Lack of qualifications or resources on the part of the partner to perform the services offered </li></ul><ul><li>Partner has been recommended by an official of the potential foreign customer </li></ul>
  11. 11. Sanctions <ul><li>Criminal: </li></ul><ul><ul><li>Fines of up $2M or more </li></ul></ul><ul><ul><li>Employee fines of $100k or more & imprisonment of up to 5 years </li></ul></ul><ul><ul><ul><li>Firms are barred from paying employees’ fines </li></ul></ul></ul><ul><li>Civil </li></ul><ul><ul><li>SEC may bring a civil action against firm and individuals & impose fine </li></ul></ul><ul><li>Private cause of action </li></ul><ul><ul><li>RICO </li></ul></ul>
  12. 12. Sanctions <ul><li>Other Governmental Action </li></ul><ul><ul><li>Barring from doing business with the govt </li></ul></ul><ul><ul><li>Indictment alone can lead to suspension of the right to do business with the government </li></ul></ul><ul><ul><li>Ineligibility to receive export licenses </li></ul></ul>
  13. 13. Ethics Hotline <ul><li>954-xxx-xxxx </li></ul><ul><ul><li>Fraud </li></ul></ul><ul><ul><li>Abuse </li></ul></ul><ul><ul><li>Improper Behavior </li></ul></ul><ul><ul><li>FCPA Red Flags </li></ul></ul><ul><ul><li>Violations </li></ul></ul>

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