In our global economy, many opportunities exist for corrupt practices and an ongoing temptation for businesses and individuals to gain an unfair advantage in the market through strategic bribery.
To that end, the United States and the UK have implemented some of the strongest laws in the world addressing bribery: the Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act of 2010.
Both acts aim to combat bribery and corruption but have different scopes and enforcement mechanisms. You could face significant fines and prison if you conduct business in either country or violate these laws.
The FCPA is a federal law prohibiting American businesses and individuals from paying bribes to foreign officials to secure business deals. The law mandates keeping accurate books in a manner that does hide illegal transactions. Any violations could result in harsh civil fines and federal criminal charges.
Also, the FCPA includes anti-bribery and books and records provisions, making it a crime to cover up corrupt practices by using false entries in company books.
This provision prohibits anyone from paying foreign officials to secure or maintain business. The books and records provisions prohibit anyone from knowingly making materially incorrect entries in the business books intending to hide foreign payoffs.
The UK Bribery Act of 2010 makes it a crime for a UK national or person located in the UK to pay or receive a bribe directly or indirectly. It covers transactions in the UK or abroad, both in the public and private sectors. It is the primary anti-corruption law in the United Kingdom and came into force in July 2011.
The FCPA prohibits bribing foreign officials, but the Bribery Act also prohibits bribing private businesspeople. The FCPA looks for an intent to bribe, but the Bribery Act only concerns whether bribery occurred.
What Bribery Is and Why It Is Harmful?
Bribery is a criminal act involving the offering, giving, receiving, or soliciting of any item of value to influence the actions of an individual holding a public or legal duty.
It is a form of corruption that distorts market competition while undermining trust, integrity, and fairness in business transactions and public administration. Bribery can take many forms, including:
- Favoritism, or
- Other undue advantages.
It is not limited to monetary exchanges but can also involve non-tangible benefits that aim to sway decisions or actions in favor of the giver.
In international business, perhaps the most common instances of bribery occur when companies or individuals bribe foreign officials of other countries to gain some advantage in conducting business. While the UK and US laws deter these practices, many other countries either do not have similar laws in place or don't enforce them.
What is the Foreign Corrupt Practices Act (FCPA)?
The FCPA, enacted in 1977, makes it unlawful for certain classes of persons and entities to make payments or offer favors to foreign government officials to assist in obtaining or retaining business.
Its purpose is to stop corruption and promote transparent and ethical conduct in international business. It applies not only to US individuals and companies but also to foreign firms and persons who take any act in furtherance of a corrupt payment while in the US.
The Foreign Corrupt Practices Act is a wide-ranging law broadly interpreted by the United States Department of Justice (DOJ). It's standard for a company to start an internal investigation by outside attorneys related to the FCPA, who will make a report to an audit committee comprised of members in high-level management. The FCPA has two main provisions: the anti-bribery provision and the accounting provision.
The FCPA's anti-bribery provision prohibits offering anything valuable to a foreign official to obtain or retain business. A “foreign official” includes any officer or employee of a foreign government and anyone who works for an entity controlled by a foreign government.
The term also covers candidates for public office, employees of state-owned companies, and members of international organizations. A conviction under this law can result in up to 5 years imprisonment per instance of bribery and stiff fines (up to $250,000 for individuals and $2 million for corporations).
The accounting provision requires all publicly traded companies to maintain accurate books and records that reflect their financial transactions accurately. It also mandates that these companies establish internal controls to ensure compliance with the FCPA's anti-bribery provision.
Companies that fail to comply with these standards can be held liable for any bribes paid by their employees, agents, or subsidiaries. Violations of the accounting provision can be steep—up to 20 years imprisonment for individuals, plus fines of up to $5 million (up to $25 million for businesses).
What is the UK Bribery Act (UKBA)?
The UK Bribery Act of 2010 serves a purpose similar to the FCPA's. The Act makes it a criminal offense to offer, promise, or give a bribe and request, agree to receive, or accept a bribe at home or abroad.
The Act also introduces a corporate offense of failing to prevent bribery by an organization's associates. This means that companies can be held liable for the actions of their employees and agents, even if they did not authorize or have knowledge of the bribery.
The only defense to this charge is for a company to show that it had adequate procedures to prevent bribery. A conviction under this law results in up to 10 years in jail per violation with no set limit on fines.
What Are the Differences Between the FCPA and the UK Bribery Act?
While both laws aim to combat bribery and corruption, there are some notable differences between the two:
- The FCPA only covers bribery of foreign officials, while the UKBA applies to both public and private sector bribery.
- The FCPA covers intent to bribe or attempts at bribery; the UKBA is only concerned with whether corruption took place.
- The FCPA applies to individuals and companies who offer bribes or attempt to conceal them; the UKBA also extends jurisdiction to companies who fail to prevent bribes.
- Under the FCPA, facilitation payments, small “bribes” to expedite routine government actions, are allowed in certain circumstances when adequately recorded, whereas they are strictly prohibited under the UKBA.
Both acts have extraterritorial reach, which applies to offenses committed outside their respective countries. However, the Bribery Act has a broader scope for any business with operations in the UK, regardless of where the bribery occurs.
Suppose you are the target of a federal investigation related to the FCPA or the UKBA. In that case, you should contact a federal criminal defense lawyer with experience handling these offenses. There are often some confusing details over what would be considered corruption and what someone must do to comply with these laws. Eisner Gorin LLP is based in Los Angeles, California.