Brush up on your anticorruption controls with FCPA guidance

BY KEN TYSIAC
November 14, 2012

The Department of Justice (DOJ) and SEC released a 120-page guide Wednesday providing a detailed analysis of the agencies’ approach to enforcement of the Foreign Corrupt Practices Act (FCPA), which is designed to prevent bribery and corruption of foreign officials by companies seeking to gain a competitive business advantage.

The law was enacted in 1977, and enforcement has been stepped up in recent years as business has become more global. In every full year since 2007, the SEC has announced FCPA enforcement actions against at least 10 companies, according to a list provided on its website. Enforcement actions were much less frequent before 2001. In 2010, the SEC created a special unit to enhance enforcement of the FCPA.

“The fight against corruption is a law enforcement priority of the United States,” Assistant Attorney General Lanny Breuer of the DOJ’s Criminal Division said in a news release. “Our FCPA enforcement is critical to protecting the integrity of markets for American companies doing business abroad, and we will continue to make clear that bribing foreign officials is not an acceptable shortcut.”

In a paper published in October 2010, the U.S. Chamber of Commerce Institute for Legal Reform proposed amendments to the FCPA, saying the FCPA enforcement environment has been costly to business.

“There is also reason to believe that the FCPA has made U.S. businesses less competitive than their foreign counterparts who do not have significant FCPA exposure,” the paper said.

Wednesday’s release by the DOJ and SEC is designed to aid businesses practicing in foreign markets. The guide contains a chapter that describes the FCPA’s accounting provisions, and defines who is considered a foreign official and the difference between proper and improper gifts.

“This guide will protect investors by assisting businesses in preventing such unlawful behavior, thus avoiding FCPA violations in the first place, which is in the interest of law enforcement and business alike,” Robert Khuzami, director of the SEC’s Division of Enforcement, said in a news release.

Accounting guidance

In one chapter, the guide explains that the FCPA’s accounting provisions operate in tandem with the antibribery provisions and prohibit off-the-books accounting.

The “books and records” provision requires companies to keep records that accurately and fairly reflect transactions and dispositions of assets. The “internal controls” provision requires companies to maintain internal accounting controls that will ensure management’s control, authority, and responsibility over the firm’s assets.

According to the guide, a company’s internal controls and compliance program should be tailored to its specific circumstances with regard to operational realities and risks such as:

  • How products or services get to market.
  • The nature of the workforce.
  • The degree of regulation.
  • The extent of government interaction.
  • The degree to which the company operates in countries where there is a high risk of corruption.


The guide says there is no one-size-fits-all FCPA compliance program, but describes aspects of compliance programs that the DOJ and SEC assess during investigations. These include:

  • Commitment from senior management and a clearly articulated policy against corruption.
  • A code of conduct and compliance policies and procedures that are clear, concise, and accessible to all employees and those conducting business on the company’s behalf.
  • Oversight and implementation by senior personnel with the proper authority, autonomy from management, and resources to be effective.
  • Effective due diligence, assessment, and analysis of the risks a particular company faces.
  • Periodic training on policies and procedures for directors, officers, relevant employees, agents, and business partners.
  • Incentives for ethics and compliance leadership, and proper disciplinary procedures.
  • Due diligence with regard to third-party agents, consultants, and distributors.
  • Mechanisms for confidential reporting by employees, and efficient, reliable internal investigations.
  • Periodic testing and review.


In addition, the guide says the FCPA applies to corrupt payments to any officer or employee of a foreign government, and those acting on the foreign government’s behalf. This definition of a foreign official means corrupt payments to low-ranking employees—as well as high-level officials—are prohibited.

Although payments to foreign officials are banned, payments to foreign governments are not prohibited, according to the guide. But the guide says companies considering payments to foreign governments should take steps to ensure that no funds are used for corrupt purposes.

Only payments intended to influence a foreign official to use his or her position to assist in obtaining or retaining business are covered by the FCPA, the guide says. Payments of travel and entertainment expenses do not necessarily violate the FCPA, the guide says, but the DOJ and SEC have brought cases where these types of expenditures were believed to be corrupt.

In the foreword to the guide, Breuer and Khuzami state that law-abiding companies are put at a competitive disadvantage when business is won or lost based on how much a company is willing to pay in bribes.

“Investors must have faith that the economic performance of public companies reflects lawful considerations of markets, price, and product,” Khuzami said in a news release, “rather than a mirage resulting from bribery and corruption.”

Ken Tysiac ( ktysiac@aicpa.org ) is a JofA senior editor.

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