United States: The United States Foreign Corrupt Practices Act – Best Practices For Compliance In The Face Of Increased Enforcement

Across the globe, investigations by regulators of pharmaceutical and biotech companies continue to grow. Companies need to evolve and adapt to reduce risk when conducting business on a global scale. Among the areas of greatest exposure for pharmaceutical and biotech companies conducting business on a multi-national level is the United States Foreign Corrupt Practices Act (FCPA or the Act), which is comprised of two sets of provisions: 1) anti-bribery provisions; and 2) accounting provisions. The anti-bribery provisions of the FCPA, the subject of this article, prohibit companies from bribing foreign officials to obtain or retain business.

Just what this entails will be described in greater detail below, but what is important to note at the on-set is that in the past ten years, FCPA enforcement has been increasingly aggressive. Fines and penalties are at an all-time high, and individuals charged are more likely to see jail time. This article will focus on the best practices, including a robust compliance program, which businesses should implement in order to minimize the risk of running afoul of the FCPA.

Just what is prohibited under the Anti-Bribery provisions?

The FCPA's anti-bribery provisions prohibit the offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to a foreign official in order to obtain or retain business.

As we will see when looking at the definition of key terms, this prohibition is quite broad. It is equally broad in its application.

The anti-bribery provisions apply to:

  • public and private companies alike;
  • including foreign subsidiaries of U.S. corporations;
  • and their officers, directors, employees, agents, and independent contractors acting on their behalf; as well as
  • non-U.S. individuals and companies who violate the FCPA while on U.S. territory.

So what does all that mean to my business?

To recap, the FCPA prohibits the payment or offer of money or anything of value to a foreign official to obtain or retain business. In order to fully grasp how broad the prohibition against bribing foreign officials is, we must understand key definitions in the Act.

Anything Of Value – "Anything of value," is interpreted very broadly, with no consideration for the amount, materiality, or even definite possibility of the giving actually taking place. Anything of value is interpreted to include tangible and intangible property, promises for future considerations, or an interest in something that has not yet even occurred.

Specific examples include:

  • executive training programs at U.S. universities,
  • charitable contributions,
  • valuable information,
  • sport outings,
  • discounts,
  • college scholarships,
  • future employment promises, and
  • transportation of household goods.

As you can see, almost anything can be interpreted as a "thing of value."

Foreign Official – "Foreign official" is one of the most difficult phrases to limit or define in the Act. Approximately 2/3 of enforcement actions involve whether an individual is a foreign official under the FCPA. Foreign official has been interpreted to include the following:

  • Agencies and state owned or state controlled entities and their employees, g., hospitals, communications firms, energy companies;
  • Public international organizations, g., UN, IMF, Red Cross
  • Relatives/ advisors/ consultants/ candidates/political parties
  • Joint ventures in which "foreign officials" participate

Improper Payment "To Obtain Or Retain Business"- The definition of "to obtain or retain business" is so broadly interpreted, there is little chance of an accused successfully arguing that a payment was not for the corrupt purpose of obtaining or retaining of business.

Examples of any business advantage, the payment for which can lead to FCPA liability include:

  • permits,
  • licenses,
  • certifications, or even
  • tax rebates.

Because the meaning of the phrase is so broad, it is almost impossible to determine what payments may fall within the statutory exemption for grease payment, discussed below. Therefore, a robust compliance program removes all decisions regarding payments to the FCPA compliance program administrator, legal counsel or CFO.

Are there no exceptions?

The provisions do contain one exception and two affirmative defenses, but they are so narrowly interpreted, the prudent business person will not rely on them.

Exception for Facilitation Payments – The FCPA contains an exception for facilitating or "grease" payments. In order to fall under this exception, the payment must be to low-level foreign officials who perform "routine governmental actions." Examples might include such things as the processing of applications for permits/licenses/ visas, police protection, power supply, cargo handling, inspection scheduling. However, it cannot be overstated that, in light of the vigorous nature of enforcement and lack of guidance on what exactly is a grease payment, no payment to a government official, should be allowed unless pre-approved by FCPA management. Even then, the payment should be properly documented.

Affirmative Defenses – The FCPA contains two affirmative defenses. The first applies only if the payment, gift, offer, or promise was lawful under the foreign country's law. However, the foreign country's law must be expressly "stated and written," and "negative implication, custom, or tacit approval" are not sufficient. The second affirmative defense is that the payment, gift, offer, or promise was a "reasonable and bona fide expenditure" that is directly related to the "promotion, demonstration, or explanation of products or services; or the execution or performance of a contract." The Act's examples include expenses such as travel and lodging. As you can see, the defenses are also narrow and very specific. Necessity is NOT a defense. Rather than rely on the exception of one of the defenses, it is more prudent to disallow any payment to a foreign official unless preapproved by the FCPA plan administrator or other top management.

How can I assess my company's risk?

Companies doing business internationally should be ever vigilant of situations that place them at higher risk of violations:

  • Foreign business
  • High risk countries
  • Business contacts with entities in which relatives or political associates of government officials are employed or have an ownership interest
  • Negative background information
  • High commissions/consulting payments
  • Cash payments
  • Convoluted payments

What, then, can I do to protect my company? Implementing a robust compliance program

This ambiguous, broad, and aggressive interpretation of the FCPA's anti-bribery provisions and increased enforcement call for companies doing business abroad to implement an aggressive compliance program and other best practices.

It is important to include the elements that the enforcement agencies have recognized as effective in such a program.

Elements of an effective, robust compliance program include:

  • Written Program
  • Board Oversight
  • Plan Management (Choose one or more people from top management who will be assigned ultimate responsibility for administering the compliance plan.)
  • Operating and Reporting (Individuals who report to the plan manager(s) must be delegated day-to-day responsibility for the program.
  • Communicating and Training (All new employees must be trained, and those directly involved in international aspects of company business must be retrained periodically.)
  • Monitoring and Evaluating (Steps must be taken to periodically ensure that the plan is followed, evaluate the effectiveness of the program and publicize a system for employees to report concerns, preferably with an anonymous option to do so.)
  • Consistent Enforcement

Summing it up

The broad interpretations of the FCPA and zealous enforcement call for vigilance on the part of companies engaged in international business. Constant assessment of risk, a vigorous compliance program and the implementation of other best practices can help these companies avoid FCPA anti-bribery violations.

Originally posted by the Pharmaceutical Compliance Monitor

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions