The Foreign Corrupt Practices Act

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The Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act


TOC o “1-3” h z u The rationale for the Act (i.e. why was it implemented) PAGEREF _Toc377398209 h 1What the Act prohibits PAGEREF _Toc377398210 h 1How the Act impacts businesses nationally, and internationally PAGEREF _Toc377398211 h 2The penalties that are imposed for violating the Act PAGEREF _Toc377398212 h 3The “real” impact and significance of the Act on U.S. commerce PAGEREF _Toc377398213 h 3Enforcement (who is responsible for enforcing the Act) PAGEREF _Toc377398214 h 5

The rationale for the Act (i.e. why was it implemented)The act is a federal law and enacted in 1977. It is based on the premise that business entities should earn their position in the society and therefore should not be engaged in soliciting for favours from government officials and politicians by the use of bribes (Weiss, 2009). This means that under this act of law, bribing by companies and corporations is termed as illegal and is punishable by law. The act covers all citizens of the United States whether by birth or by registration (Posadas, 2009). It also includes other citizens of a country so long as the act is committed while one is in the boundaries of the United States. The only exception is for diplomats for from other countries.

What the Act prohibitsThe act is divided into two provisions: the first provision is the anti-bribery provision which is supposed to be enacted by the department of justice. The provision prohibits any form of bribery to government officials and political parties by an individual or a company in order to get commercial related favours. In this act there is a clear distinction between bribery and grease payments to politicians and government officials (Weiss, 2009). Even though in some states both are considered as illegal, the act allows for grease payment as they are said to expedite the person however it must be clearly recorded and known to the supervisor in charge. This is to ensure that there is transparency.

The second provision is the accounting provision which is overseen and enacted by the Securities and Exchange Commission (SEC). The provision allows for clear financial statements on the spending of a firm (Posadas, 2009). This provision also states that all companies that have their securities listed by the United States should record all the financial transactions that the company participates in. This means that from time to time the books are to be checked and compared to the current financial position of the companies. In the case of any irregularity the firm can be fined or even worse closed down.

Generally the act prohibits government employee and politicians from receiving bribes from companies and individuals in order to be able to get favours that may lead to commercial flourishing. It also prohibits companies from poor accounting in terms of their finances. All financial transactions should be clearly recorded and stored for analysis by the government agents. The company should always pay its taxes and avoid transferring money to anybody as a bribe.

How the Act impacts businesses nationally, and internationallyNationally the act ensures that all officers of the state are not involved in any activities that would allow a company to continue engaging in any illegal activities. It ensures that all companies are registered with the government before they can start on their operations (Weiss,, 2009). Accounting is checked not only to ensure that the firm is recording all the financial transactions but also to know whether there are frauds in terms of tax evasion and in corporate payments. This is also used to deter any kind of fraudsters from attempting as there are regular checkups.

Internationally it ensures that fraudsters from other countries do not come to the United States and start illegal businesses by bribing their way up. It also ensures that all international organizations in the country like the UN are legally framed and have transparent financial records that cannot act as a breading point for any illegal commercial activities (Rich, 1994). In general internationally the act protects the United States from international criminals that may be interested in establishing companies in the country.

Internationally it also protects other countries from American citizens who would like to bribe their way into commercial activities in the country or to avoid accounting transparency as well. A good example is that of WalMart, a US based firm is: that was found guilty and charged for bribing officials in Mexico in order to acquire business premises and permits. This led to the closure of the premises and the revocation of the permits by the US government in conjunction with the government in Mexico (The Washington Post, 2012).

The penalties that are imposed for violating the ActThe penalties can go as high as a fine of $450million like the one charged by the courts to Siemens Ag, when the company was found guilty of bribing some public officers and not maintaining correct books of account. This was the beginning of the investigation into the company and it uncovered a lot (Funk, 2010). In other circumstances the bribed party is imprisoned to a sentence of not more than three years in a state penitentiary, while the one who bribed gets a sentence of five years. They are also liable to a fine or both a fine and imprisonment. The fine is to be decided by the court depending on the reasons behind the bribery. The company that would be found guilty of bribery would be dissolved as per the specifications of the case and at times it would become state owned.

The “real” impact and significance of the Act on U.S. commerceCommercial activities form the backbone of any country; this is because the only way to establish if there is development in a country is by the increase in its GDP and Income. These are all factors of commercial activities. This is the reason why the government has to protect the sector by enacting federal laws that ensure that all people are equal. The law is placed there to level the playing field so that nobody can oppress the other. This is because if such a law was not enacted the rich would always bribe their ways into contracts and permits at the expense of the poor. The disparity between the rich and the poor would increase and what was termed by Karl Marx as an army of unemployed and under-employed would become the fate of the poor.

The real significant of the act is to ensure that there are no short cuts and that everybody follows the correct means. The state should reward people in form of income from business activities that were earned from qualification due to experience and exposure but not because of being able to bribe someone somewhere to get ahead. If buying favours is allowed, then it means that the people of the country would be allowed to consume substandard goods and services (Funk, 2010). This is because the provider of these goods and services will be allowed to do so not because they are qualified but because they had the initial money to bribe their way there.

The backbone of the act is to protect the citizens of the country: to protect the education system so that the children can know that people get to the top by having the necessary technical qualification and not by bribing their way there (Rich, 1994). It is meant to protect the everyday citizen who has a hard time making the ends meet, so that he can work even harder because he knows that there will be a reward for his hard work. It is meant to encourage the youths to invest in businesses and make them legitimate and after a given period of time they will be able to grow and flourish because the law is there to protect them.

Enforcement (who is responsible for enforcing the Act)The US Securities and Exchange Commission is responsible for investigating for any inconsistencies in accounting books of all firms (Funk, 2010). This means it is in conjunction with the IRS in determination of corporate tax payments. It also analyzes the transfer of funds from the corporate bank accounts to any other bank account around the world.

The Department of Justice is the federal body of criminal investigation, it is headed by the attorney general of the government. In this case it is responsible for investigating the government employees and their involvement in any favouring after a grease payment was made or after bribery by a company. It is allowed to open and start investigation into individuals on their conduct at the work station and any other place. This allows them to investigate companies that are based in American and venturing into the emerging markets. The conduct of the firm should be as per the laws of the United States and any violation of them can lead to immediate shut down and dissolution of the mother firm in America.


Funk, T. Markus (September 10, 2010). “Getting What They Pay For: The Far-Reaching Impact Of the Dodd-Frank Act’s ‘Whistleblower Bounty’ Incentives on FCPA Enforcement”. White Collar Crime Report (Bureau of National Affairs) 5 (19): 1–3.

Posadas, Alejandro. (2009) “Combating Corruption Under International Law” . School of Law, Duke University.

Rich, Ben R. and Janos, Leo. (1994) Skunk Works: A Personal Memoir of My Years at Lockheed. New York: Little Brown & Co., , p. 10.ISBN 0-7515-1503-5.

Barstow, David (April 21, 2012). “Vast Mexican Bribery Case Hushed Up by Wal-Mart After High-Level Struggle”. The New York Times.

The Washington Post, (April 22, 2012), Mexican watchdog group says Mexico’s federal government should probe alleged Wal-Mart bribes, Associated Press..

Weiss, David C. (2009), The Foreign Corrupt Practices Act, SEC Disgorgement of Profits, and the Evolving International Bribery Regime: Weighing Proportionality, Retribution, and Deterrence, 30 Michigan Journal of International Law 471

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