In this column we typically look at laws and legal issues unique to transportation. In this installment of PARCEL Counsel, we will examine a law applicable to virtually any type of business organization — the Foreign Corrupt Practices Act or FCPA.
The FCPA was enacted in 1977. Its primary purpose is to deter U.S. businesses and business persons from participating in the corruption which pervades and debilitates many countries throughout the world. It is a somewhat unique federal statute in that it prohibits activities that could take place entirely outside of the United States as well as within the United States.
It is comprised of two principal sections. The first, which we will focus on here, is known as the Anti-Bribery section. The second is the Accounting section. This section prescribes that all transactions be recorded in the company’s records AND that they be accurately characterized. The intent is to deter companies from describing payments as “consulting fees” when they are, in fact, bribes prohibited by the FCPA.
The Anti-Bribery section prohibits “offering to pay, paying, promising to pay, or authorizing the payment of money or anything of value to a foreign official in order to influence any act or decision of the foreign official in his or her official capacity or to secure any other improper advantage in order to obtain or retain business”.
It should be noted that the term “foreign official” is broadly interpreted. And indirect payments, e.g., to a cousin or friend of the official, are equally prohibited.
These prohibitions are not to be taken lightly — there are serious and substantial civil and criminal penalties. In 2010, a large international freight forwarding company and six of its corporate customers paid a total of more than $235,000,000 in civil and criminal sanctions. Some of the charges directly touched the supply chain — evading customs duties, improper expedition of imports, and obtaining false documentation relating to temporary import permits.
Interestingly, there is an exception for “facilitating or expediting payments.” This exception applies only when a payment is made in relation to a “routine governmental action that involves nondiscretionary acts.” An example would be an amount paid to a Postmaster to do something that the Postmaster is already supposed to do, i.e., deliver the mail. Such “greasing the skids” is very similar to a bribe, but it is not prohibited. However, if one paid the Postmaster to allocate one of a limited number of post office boxes to the person making the payment, it would be a prohibited act.
Virtually all major corporations involved in activities in foreign companies have internal policies and controls to ensure compliance by its employees with the FCPA. However, smaller organizations without an internal legal department or persons just beginning to conduct business outside of the United States also need to be very much aware of the nuances and intricacies of the FCPA.
It is my sense that at many foreign airports and seaports there are lots of cash payments made on a daily basis… and indeed the FCPA recognizes this by exempting “facilitating payments.” If a payment is truly in the nature of a facilitating payment, then it would fall within the exemption. But if not truly a facilitating payment, it is illegal and prohibited.
For those wishing to learn more about the FCPA, I would recommend starting with “A Resource Guide to the U.S. Foreign Corrupt Practices Act” written by the Criminal Division, U.S. Department of Justice & the Enforcement Division, U.S. Securities and Exchange Commission, which can be found at http://www.justice.gov/criminal/fraud/fcpa/guide.pdf.
In the next installment of PARCEL Counsel we will draw from this Guide to provide a few examples illustrating very similar activities — some of which would be considered to be exempt facilitating payments and others which would be considered to be prohibited actions.
All for now!
Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found in the “Content Library” on the PARCEL website (www.PARCELindustry.com). Your questions are welcome at brent@primuslawoffice.com.
The FCPA was enacted in 1977. Its primary purpose is to deter U.S. businesses and business persons from participating in the corruption which pervades and debilitates many countries throughout the world. It is a somewhat unique federal statute in that it prohibits activities that could take place entirely outside of the United States as well as within the United States.
It is comprised of two principal sections. The first, which we will focus on here, is known as the Anti-Bribery section. The second is the Accounting section. This section prescribes that all transactions be recorded in the company’s records AND that they be accurately characterized. The intent is to deter companies from describing payments as “consulting fees” when they are, in fact, bribes prohibited by the FCPA.
The Anti-Bribery section prohibits “offering to pay, paying, promising to pay, or authorizing the payment of money or anything of value to a foreign official in order to influence any act or decision of the foreign official in his or her official capacity or to secure any other improper advantage in order to obtain or retain business”.
It should be noted that the term “foreign official” is broadly interpreted. And indirect payments, e.g., to a cousin or friend of the official, are equally prohibited.
These prohibitions are not to be taken lightly — there are serious and substantial civil and criminal penalties. In 2010, a large international freight forwarding company and six of its corporate customers paid a total of more than $235,000,000 in civil and criminal sanctions. Some of the charges directly touched the supply chain — evading customs duties, improper expedition of imports, and obtaining false documentation relating to temporary import permits.
Interestingly, there is an exception for “facilitating or expediting payments.” This exception applies only when a payment is made in relation to a “routine governmental action that involves nondiscretionary acts.” An example would be an amount paid to a Postmaster to do something that the Postmaster is already supposed to do, i.e., deliver the mail. Such “greasing the skids” is very similar to a bribe, but it is not prohibited. However, if one paid the Postmaster to allocate one of a limited number of post office boxes to the person making the payment, it would be a prohibited act.
Virtually all major corporations involved in activities in foreign companies have internal policies and controls to ensure compliance by its employees with the FCPA. However, smaller organizations without an internal legal department or persons just beginning to conduct business outside of the United States also need to be very much aware of the nuances and intricacies of the FCPA.
It is my sense that at many foreign airports and seaports there are lots of cash payments made on a daily basis… and indeed the FCPA recognizes this by exempting “facilitating payments.” If a payment is truly in the nature of a facilitating payment, then it would fall within the exemption. But if not truly a facilitating payment, it is illegal and prohibited.
For those wishing to learn more about the FCPA, I would recommend starting with “A Resource Guide to the U.S. Foreign Corrupt Practices Act” written by the Criminal Division, U.S. Department of Justice & the Enforcement Division, U.S. Securities and Exchange Commission, which can be found at http://www.justice.gov/criminal/fraud/fcpa/guide.pdf.
In the next installment of PARCEL Counsel we will draw from this Guide to provide a few examples illustrating very similar activities — some of which would be considered to be exempt facilitating payments and others which would be considered to be prohibited actions.
All for now!
Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found in the “Content Library” on the PARCEL website (www.PARCELindustry.com). Your questions are welcome at brent@primuslawoffice.com.
