Many corporations are at the forefront of innovation, developing technology that aims to revolutionize the world. Some business owners find it necessary to establish relationships abroad to move their company forward. Be careful if you do. You may expose yourself to legal liability if you inadvertently violate the Foreign Corrupt Practices Act (FCPA) when doing business with others abroad.
What is the Foreign Corrupt Practices Act?
The FCPA is a federal law that went into effect here in the United States in 1977. It prohibits business owners from bribing foreign officials to solicit or maintain their business. All publicly-traded U.S. corporations must abide by this law, whether they exclusively work domestically or have international operations.
FCPA doesn’t just apply to a company owner, but also its:
- Corporate officers
- Board of directors
This federal law also applies to anyone working for a company, whether they directly or indirectly employ them. Anyone you’ve entered into a joint venture with, your distributors and consultants, must all abide by this same law. Your company may face legal repercussions if one of these parties’ actions violates it.
Proving compliance with the Foreign Corrupt Practices Act
Federal officials require businesspersons subject to FCPA to maintain certain record keeping requirements. Some of these include:
- An inventory of their assets
- A log of who has access to a company’s assets
- A record of any transactions involving a company’s assets
The federal government also expects companies to oversee other parties’ uses of their assets to confirm that intended and actual use align.
What penalties exist for Foreign Corrupt Practices Act violations?
There are stiff penalties associated with violating the FCPA. Most notably, any company and its agents must cede any financial gains they derived from an illicit arrangement with a foreign entity to the federal government. Federal officials may also tack on prejudgment interest to this amount and assign an independent party to scrutinize your future corporate decision making.
U.S. Securities and Exchange Commission (SEC) officials can also independently punish officers, stockholders, directors, workers and agents accused of violating this federal anti-bribery law.
Avoid violating the Foreign Corrupt Practices Act
Federal officials tend to be unrelenting in aggressively pursuing those they believe have run afoul of the law. This is why you take time to learn about the FCPA and ensure that you take the necessary steps to avoid violating it. It can cost you your business and lead to other legal problems if you do.