NATIONWIDE: An Introduction to FCPA

In this Practice Guide, we provide an overview of the Foreign Corrupt Practices Act’s (“FCPA”) statutory framework and describe recent enforcement trends.

FCPA Overview 

Anti-Bribery Provisions 

The FCPA contains both anti-bribery and accounting provisions. The anti-bribery provisions make it illegal to corruptly pay, offer to pay, promise to pay, or authorize the payment of anything of value to a foreign official with the intent to obtain or retain business. Liability can attach to indirect payments, for example, when a third party, such as an agent or consultant, offers or makes the corrupt payment to the foreign official (or an agent of the official) on the individual’s behalf, where the individual knows, or should have known, about the offer or payment. “Foreign official” is broadly defined to include elected politicians, heads of state, any government employee (e.g., customs officials or police officers), employees of state-controlled entities, and employees of certain public international organizations, such as the World Bank and the United Nations. “Anything of value” includes monetary bribes and tangible gifts, as well as other benefits such as paying for a foreign official’s travel expenses or employing his or her family members. Even small gifts may be considered illegal if other elements of the offense are established.

The anti-bribery provisions apply to: (i) “issuers,” (ii) “domestic concerns,” and (iii) individuals and entities when acting in the United States (“territorial jurisdiction”). An “issuer” is any company, foreign or domestic, that trades equity or debt on a U.S. stock exchange, or that is required to file periodic reports with the SEC. “Domestic concerns” are U.S. citizens and residents, any company incorporated in the U.S., including U.S. subsidiaries of foreign companies, and foreign nationals working for, or acting as agents of, U.S. companies abroad. The “territorial jurisdiction” category applies to any entity or individual, including foreign entities or persons, when they take any action in furtherance of a corrupt scheme while within the United States. In sum, as is clear from the statutory language, liability under the statute can apply to both U.S. and foreign entities and individuals and to conduct both inside and outside of the United States.

Accounting Provisions 

The FCPA’s accounting provisions apply to all issuers. There are two components: (i) the books and records provision, which requires issuers, as well as their consolidated subsidiaries and affiliates, to make and keep books and records which, in “reasonable detail,” accurately and fairly reflect the issuer’s transactions and disposition of assets, and (ii) the internal controls provision, which requires issuers to devise and maintain an adequate system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements.

Liability under the accounting provisions does not require any bribery-related conduct. Public companies can be held liable even if they did not make or authorize an improper payment. As a result, the FCPA’s main enforcers, the Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”), often bring claims under the accounting provisions when they are unable to meet all the required elements of the anti-bribery provisions.

Statute of Limitations 

The FCPA does not specify a statute of limitations. Accordingly, for the anti-bribery violations, the general five-year limitations period specified in the U.S. criminal code applies to all substantive criminal violations. Criminal violations of the accounting provisions, defined as securities fraud offenses, have a six-year statute of limitations. However, in cases involving conspiracies, the government may reach back to prosecute conduct that occurred prior to the five or six-year limitations period if it can prove that at least one act in furtherance of the conspiracy occurred within the limitations period. The general five-year statute of limitations period also applies to SEC actions seeking civil penalties, but the limitation period is ten years when equitable remedies are sought.

Dual Enforcement Authority  

The DOJ and SEC share primary enforcement authority for the FCPA. The DOJ has criminal FCPA enforcement authority over issuers, and criminal and civil enforcement authority over “domestic concerns” and those over which it exerts “territorial jurisdiction.” The SEC has civil enforcement authority over issuers. Both agencies often exert concurrent jurisdiction over the same matter.

FCPA-Related Laws 

When the DOJ brings charges under the FCPA, it commonly invokes other U.S. criminal laws, such as the Money Laundering Control Act, which criminalizes a wide range of transactions and transfers of proceeds from “specified unlawful activity,” defined to encompass over 200 U.S. laws and certain foreign crimes, including fraud and bribery. The statute provides for extraterritorial jurisdiction where the conduct occurs in part in the United States and the transaction or series of related transactions involves funds or monetary instruments of a value exceeding $10,000. The DOJ has taken an expansive view of what constitutes conduct occurring “in part” in the United States, particularly for banking transactions, enabling it to pursue conduct that is not always actionable under the FCPA. The DOJ often uses anti-money laundering laws to charge foreign officials with taking bribes, since only bribe recipients, and not bribe takers, can be charged under the FCPA.

FCPA Policies and Enforcement Trends 

DOJ policy incentivizes companies to voluntarily disclose misconduct in violation of the FCPA by providing for a presumption in favor of a declination when a company self-discloses misconduct, fully cooperates with DOJ’s investigation, and timely and appropriately remediates, absent aggravating circumstances. But declinations have been relatively rare over the last few years, with the DOJ issuing a declination in March 2022 after not doing so for over a year and a half.

Under President Biden, the DOJ has issued revised policy guidance signaling more robust enforcement. In particular, companies are now only eligible for cooperation credit from the DOJ if they provide information about all individuals involved in or responsible for the misconduct. This revises guidance during the Trump administration that required companies only to identify individuals whose involvement was substantial. It also indicates that the DOJ will place a heavy emphasis on pursuing prosecutions of individuals, as recently emphasized by Attorney General Merrick B. Garland. With regard to corporate resolutions, the revised policies require prosecutors to consider all prior misconduct by the company, whether or not that misconduct is similar to the conduct being investigated. The revised guidance also reinvigorates DOJ’s approach to requiring corporate monitors, which had been appointed only in rare cases during the Trump Administration.

The Biden administration also issued the first-ever U.S. Strategy on Countering Corruption (the “Strategy”) which defines corruption as a core U.S. national security interest. The Strategy breaks new ground by, inter alia, bringing together a diverse set of government agencies to assist in anti-corruption efforts, proposing new and robust regulations to target illicit financing, and calling for enhanced collaboration with foreign governments.

Conclusion 

FCPA enforcement under the DOJ and SEC remains strong. Given the Biden administration’s commitment to fighting corruption and its focus on expanding this imperative to other government agencies, a development that was already underway even prior to the adoption of the Strategy, we expect robust anti-corruption enforcement in the years to come, more than sufficient to compensate for the apparent slowdown in enforcement activity in 2020 and 2021 stemming from the COVID-19 pandemic and administration changeover.