Violations of the Foreign Corrupt Practices Act (FCPA) can expose corporations and individuals to criminal penalties and fines. And while the perception is that only large companies are at risk, smaller companies doing business abroad are also at risk for prosecution, says Edmund W. “Ned” Searby, chair of the White Collar Crime, Antitrust and Securities Litigation Practice at McDonald Hopkins LLC.
“Middle-market and smaller companies have generally given the FCPA far less consideration,” Searby says. “In part, this is because marketing about the act has primarily targeted large corporations that have the discretionary cash to pay for large teams of lawyers and accountants. There is also a false sense of security that the targets of the FCPA are big, publicly traded corporations. In addition, there is the misperception that middle-market companies cannot afford to implement a meaningful compliance program.”
Smart Business spoke with Searby about how a compliance plan can limit the risks of prosecution when doing business abroad.
What is the Foreign Corrupt Practices Act?
The FCPA prohibits the corrupt offer, promise or payment of anything of value to foreign government officials, political parties, party officials or candidates in order to obtain or retain business. The FCPA makes no distinction as to the size of the offender. There is no materiality standard, and the payment of anything of value, no matter how small, can violate the statute. Payments to third parties are unlawful when made with knowledge that all or part of the payments will be passed on to a government official or other covered person.
There are also provisions that apply to publicly traded companies that require maintenance of reasonably detailed and accurate books and records. The act includes criminal liability for knowingly falsifying books and records or for knowingly failing to implement an internal control system. But even if the company is not publicly traded, it should have accurate books and records. An effective compliance program should ensure effective controls for the timely, complete and accurate recording of financial transactions.
In addition to the FCPA, are there other federal laws and regulations that should concern those doing business abroad?
Yes, in addition to the FCPA, companies doing business abroad should ensure compliance with United States’ export controls and embargoes on trade with specified foreign nations. Of course, companies should also be wary that their conduct does not violate the laws of the host country.
