Question

Please research the Foreign Corrupt Practices Act (FCPA) and answer or address the Homework Questions shown below.

- Provide a brief explanation of the history of the Foreign Corrupt Practices Act (FCPA).

- What is the primary purpose of the FCPA?

- What does the FCPA prohibit?

- Who does the FCPA apply to?

- What is the maximum penalty under the FCPA?

- What are indicators that an individual or organization may have violated the FCPA?

- Explain why an activity considered “corrupt” in one country might be considered culturally acceptable in another. Please provide an example(s).

Answer 1

1) Brief explanation of the history of the Foreign Corrupt Practices Act (FCPA)

Foreign Corrupt Practices Act (FCPA)  was enacted in the wake of the “Watergate” scandal in the United States. In the mis 1970's investigations by the U.S. Securities and Exchange Commission revealed that significant number of US companies admitted making illegal payments to foreign government officials, politicians, and political parties in order to secure or retain business. As a result of these revelations, Congress enacted the FCPA to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system. The Act was signed into law by President Jimmy Carter on December,1977. The Act was first amended by the Omnibus Trade and Competitiveness Act of 1988 and the second amendment was the International Anti-Bribery Act of 1998 which extended the scope beyond US borders.

2) Primary purpose of the FCPA

The primary purpose of FCPA is to make it unlawful for businesses and individuals to make payments (bribes) to foreign government officials in an attempt to seek or retain business. In other words, to prohibit companies and their individual officers from influencing foreign officials with any personal payments or rewards Secondly, all companies with securities in the Untied States must meet the United States' accounting transparency requirements.

3) Prohibition by FCPA

FCPA prohibits payments,gifts or even offers of anything of value in any form to foreign officials by businesses and individuals to secure any improper advantage in obtaining,retaining or directing business.

4) Application of FCPA

FCPA applies to any person who has a certain degree of connection to the United States and engages in corrupt practices abroad as well as to U.S. businesses, foreign corporations trading securities in the US, American nationals, citizens, and residents acting in furtherance of a foreign corrupt practice, whether or not they are physically present in the US.

5) Maximum penalty under the FCPA

The maximum penalty under FCPA is $100,000 fine per violation and up to a 5 year imprisonment per violation.

6) Indicators that an individual or organization may have violated the FCPA

• If accurate and current financial records of any payments to foreign officials, including detailed invoices and receipts are not maintained.
• If stipends are not reasonable estimates of expected costs and provide any additional compensation or money to foreign officials.
• While covering lodging or meals for a foreign official, the costs are not paid directly to vendors and cash is given directly to the foreign official.
• Payments are conditioned on any specific action by a foreign official.

7) Different countries have different attitudes towards corruption. Countries in northern Europe is extremely intolerant towards corruption whereas in southern Europe corruption is an almost normal, socially acceptable phenomenon. There are countries with a democratic past which traditionally prosecute corruption, on the other hand there are former socialist countries, where the corruption was a part of tradition. For example, a thank you in the form of a gift for a service for which the person has already been paid with a salary is an expression of courtesy in some countries, whereas in some countries it is considered corruption. Hence ethics and morality is differs in different countries and this is why an activity considered corrupt in one country might be considered culturally acceptable in another.