The Foreign Corrupt Practices Act (FCPA) is a US law established in 1977 that targets corruption in international business. This law serves two main functions:

• It forbids US companies, US citizens, and certain international firms from bribing foreign officials to secure or keep business.

• It requires companies listed on the stock market to keep accurate books and to maintain effective internal controls to monitor financial dealings.

The Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) enforce the FCPA, which plays an important role in promoting ethical global business practices. Although certain payments are easily recognisable as outright bribes, the legality of other payments, such as facilitation payments, can vary. Below, we’ll examine how facilitation payments are handled under the FCPA.

What’s in this article?

• What are facilitation payments?
  
• What are facilitation payments used for?
  
• What’s included in the FCPA?
  
• Does the FCPA include a facilitation payments exemption?
  
• Are facilitation payments legal everywhere?
  

What are facilitation payments?

Facilitation payments are small sums paid to government officials to speed up routine, non-discretionary services. These services might include processing government papers (e.g. visas), handling utility services, or expediting goods through customs. Depending on the country and its laws, these payments can either be routine or be considered bribes.

What are facilitation payments used for?

Facilitation payments expedite routine, non-discretionary governmental actions, including the following:

• Government documents such as visas, work orders, and licences

• Customs clearance for goods to pass through borders or ports

• Utility services such as power and water

• Police protection or security that might not be readily provided otherwise

These payments can speed up processes that are often slow or bogged down by bureaucratic delays to ensure that businesses can operate smoothly and predictably.

What’s included in the FCPA?

The FCPA is a piece of US legislation that targets corruption and bribery across international borders. Here’s what it includes.

Anti-bribery provisions

The anti-bribery provisions of the FCPA prohibit the following:

• Direct and indirect bribes: The FCPA forbids US individuals, businesses, and certain foreign issuers of securities from offering, paying, promising to pay, or authorising the payment of money or anything of value to foreign officials to influence any act or decision of these officials in their official capacity.

• Securing any improper advantage: The same individuals and businesses cannot make payments to secure business advantages such as winning a contract and securing any advantages in regulatory actions, taxes, or other government interactions.

• Intermediary involvement: If these parties know that a portion of any payments they make will be offered to a foreign official indirectly through a third party, that violates the FCPA.

Accounting provisions

The FCPA’s accounting provisions ensure companies adhere to specific accounting standards that enable full transparency over corporate funds and assets. These provisions govern the following:

• Books and records: Companies must keep detailed books, records, and accounts that accurately and fairly reflect the transactions and dispositions of the corporation’s assets. This requirement prevents companies from disguising illicit payments as legitimate expenses.

• Internal controls: Corporations must maintain a system of internal accounting controls that ensures management’s control, authority, and responsibility over the firm’s assets. This helps detect and prevent corrupt acts such as embezzlement and bribery.

Enforcement

The SEC and the DOJ jointly enforce the FCPA. The DOJ can prosecute FCPA cases involving US businesses, individuals, and entities, as well as foreign nationals or companies acting on behalf of a US citizen or entity.

Does the FCPA include a facilitation payments exemption?

The FCPA generally permits facilitation payments and considers them exempt from its anti-bribery provisions. But this exception is only for expediting routine governmental actions that would occur even without payment. It does not include any payments that might affect the outcome of an official’s decision.

For example, if you’re applying for a visa, you can legally make a facilitation payment to get your application processed faster. But you can’t make a payment to improve your application’s chances of approval. The FCPA permits payments to speed up the process but not payments to secure a certain outcome.

Are facilitation payments legal everywhere?

In the US, facilitation payments are usually the payer’s legal right. Internationally, the rules governing these payments are less lenient. Here’s a rundown:

• UK Bribery Act: Unlike the FCPA, the UK’s Bribery Act makes no distinction between bribes and facilitation payments. Following a stricter stance on corruption and bribery, the UK considers all such payments illegal.

• Organisation for Economic Co-operation and Development (OECD) Anti-Bribery Convention: The OECD’s Anti-Bribery Convention does not prohibit facilitation payments, but the OECD has urged countries to stop this payment type. Member countries such as Belgium and Canada have banned facilitation payments.

• Local laws: In many countries, any payment that might be seen as influencing a government official, regardless of its amount or intent, could be considered illegal. Companies operating in multiple jurisdictions must appraise local laws to determine what’s permitted.