Business Miscellaneous

When Are Normal Business Activities Deemed “Bribery”?

The Foreign Corrupt Practices Act (FCPA) was enacted in 1977 to prohibit US businesses and others subject to the law from bribing foreign officials to obtain or retain business. It’s been over 40 years since the law was passed, but egregious misconduct still occurs in the global marketplace, such as giving suitcases full of cash to bonafide foreign government officials to secure lucrative foreign government contracts. Although this is an extreme example, there are many other situations that may seem like normal business activities, but in fact are considered bribes by the FCPA enforcement agencies – how do you recognize them and protect your business?

The “B” word

In the minds of some, FCPA compliance is straightforward – “just don’t bribe” – however, this all depends on your interpretation of the “b” word. This is the main reason many businesses have fallen to FCPA scrutiny: the U.S. Government has a very broad interpretation of what it considers “bribery.” In fact, the U.S. Government has stated that it intends to enforce the FCPA “to its fullest extent” and that the “FCPA is properly read” to cover gifts, travel or entertainment.” Consistent with this approach, recent FCPA enforcement actions such as those involving JP Morgan, NuSkin Enterprises, and SciClone Pharmaceuticals (among many others) have concerned internships and jobs, charitable donations, and corporate hospitality such as golf or happy hours.

It’s not that such conduct is inherently corrupt. It’s completely reasonable for businesses to offer internships and job opportunities, be engaged corporate citizens in the communities they serve, and have some fun with current and potential clients. What classifies otherwise normal business activities as potential FCPA violations in the eyes of the U.S. government is specifically related to the type of recipient – a so-called “foreign official” under the FCPA.

Who are considered “foreign officials”?

You may be thinking, “Okay, that’s easy enough. We simply need to monitor our business interactions and expenditures to foreign officials.” You may even breathe a sigh of relief because maybe your business, in particular, doesn’t even have dealings with Presidents, Prime Ministers, or other Heads of State.

So you’re in the clear, right? Well, not quite. The U.S. government deems a broad category of individuals that bear little resemblance to such traditional government officials to be “foreign officials” under the FCPA. Such individuals include employees of so-called state-owned or state-controlled enterprises (including many of the largest companies of the world), physicians and others associated with foreign healthcare systems, and other bureaucratic and regulatory officials common in the global marketplace.

So what are businesses supposed to do? Because so many FCPA enforcement actions involve otherwise normal business activity, it’s not feasible to stop offering internships or jobs, stop being an engaged corporate citizen, or stop having fun with current and potential clients.

Managing your FCPA risk

Now that you know how far-reaching the repercussions of FCPA regulations can be, there are a few ways to manage your risk. To start, identify all points of contact your business has with so-called “foreign officials” in the global marketplace. Second, prioritize oversight and supervision of employee and agent interaction with such individuals. In other words, individuals across your business (from sales, to finance and accounting, to expense management) need to understand and appreciate how and when “normal” activity may be deemed bribery. Finally, consider using artificial intelligence tools such as AppZen, which will automatically check the names of guests on expense reports against a database of politically-exposed individuals and alert you if there’s a match.

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Article provided by AppZen home of the artificial intelligence platform that emulates human intelligence and reasoning, but does so at a scale far more productive and effective than a large team of auditors.