FCPA - A Resource Guide to the US Foreign Corrupt Practices Act

214076 A Resource Guide to the U.S. Foreign Corrupt Practices Act By the Criminal Division of the U.S. Department of Justice and the Enforcement Division of the U.S. Securities and Exchange Commission By the Criminal Division of the U.S. Department of Justice and the Enforcement Division of the U.S. Securities and Exchange Commission

We are pleased to announce the publication of A Resource Guide to the U.S. Foreign Corrupt Practices Act. e Foreign

Corrupt Practices Act (FCPA) is a critically important statute for combating corruption around the globe. Corruption has

corrosive eects on democratic institutions, undermining public accountability and diverting public resources from impor-

tant priorities such as health, education, and infrastructure. When business is won or lost based on how much a company is

willing to pay in bribes rather than on the quality of its products and services, law-abiding companies are placed at a com-

petitive disadvantage—and consumers lose. For these and other reasons, enforcing the FCPA is a continuing priority at the

Department of Justice (DOJ) and the Securities and Exchange Commission (SEC).

e Guide is the product of extensive eorts by experts at DOJ and SEC, and has beneted from valuable input from

the Departments of Commerce and State. It endeavors to provide helpful information to enterprises of all shapes and sizes—

from small businesses doing their rst transactions abroad to multi-national corporations with subsidiaries around the world.

e Guide addresses a wide variety of topics, including who and what is covered by the FCPA"s anti-bribery and accounting

provisions;the denition of a “foreign ocial"; what constitute proper and improper gis, travel and entertainment expenses;

the nature of facilitating payments; how successor liability applies in the mergers and acquisitions context; the hallmarks of

an eective corporate compliance program; and the dierent types of civil and criminal resolutions available in the FCPA

context.On these and other topics, the Guide takes a multi-faceted approach, setting forth in detail the statutory require-

ments while also providing insight into DOJ and SEC enforcement practices through hypotheticals, examples of enforce-

ment actions and anonymized declinations, and summaries of applicable case law and DOJ opinion releases.

e Guide is an unprecedented undertaking by DOJ and SEC to provide the public with detailed information about

our FCPA enforcement approach and priorities. We are proud of the many lawyers and sta who worked on this project,

and hope that it will be a useful reference for companies, individuals, and others interested in our enforcement of the Act.

November 14, 2012

Assistant Attorney General

Criminal Division

Department of JusticeDirector of EnforcementSecurities and Exchange Commission

Chapter 1:

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

The Costs of Corruption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Historical Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

National Landscape: Interagency Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Department of Justice

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Securities and Exchange Commission

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Law Enforcement Partners

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Departments of Commerce and State

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

International Landscape: Global Anti-Corruption Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

OECD Working Group on Bribery and the Anti-Bribery Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

U.N. Convention Against Corruption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Other Anti-Corruption Conventions

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Chapter 2:

THE FCPA: ANTI-BRIBERY PROVISIONS . . . . . . . . . . . . . . . . . . . . 10

Who Is Covered by the Anti-Bribery Provisions?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Issuers—15 U.S.C. § 78dd-1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Domestic Concerns—15 U.S.C. § 78dd-2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Territorial Jurisdiction—15 U.S.C. § 78dd-3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

What Jurisdictional Conduct Triggers the Anti-Bribery Provisions?. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

What Is Covered?—The Business Purpose Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

What Does “Corruptly" Mean?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

What Does “Willfully" Mean and When Does It Apply? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

What Does “Anything of Value" Mean?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Cash

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Gifts, Travel, Entertainment, and Other Things of Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Charitable Contributions

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Who Is a Foreign Ofcial?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Department, Agency, or Instrumentality of a Foreign Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Public International Organizations

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

How Are Payments to Third Parties Treated? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

What Afrmative Defenses Are Available? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

The Local Law Defense

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Reasonable and Bona Fide Expenditures

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

What Are Facilitating or Expediting Payments? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

Does the FCPA Apply to Cases of Extortion or Duress? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

Principles of Corporate Liability for Anti-Bribery Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

Parent-Subsidiary Liability

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

Successor Liability

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

Additional Principles of Criminal Liability for Anti-Bribery Violations:

Aiding and Abetting and Conspiracy . . . .34

Chapter 3:

THE FCPA: ACCOUNTING PROVISIONS . . . . . . . . . . . . . . . . . . . . 38 A Resource Guide to the U.S. Foreign Corrupt Practices Act By the Criminal Division of the U.S. Department of Justice and the Enforcement Division of the U.S. Securities and Exchange Commission By the Criminal Division of the U.S. Department of Justice and the Enforcement Division of the U.S. Securities and Exchange Commission

We are pleased to announce the publication of A Resource Guide to the U.S. Foreign Corrupt Practices Act. e Foreign

Corrupt Practices Act (FCPA) is a critically important statute for combating corruption around the globe. Corruption has

corrosive eects on democratic institutions, undermining public accountability and diverting public resources from impor-

tant priorities such as health, education, and infrastructure. When business is won or lost based on how much a company is

willing to pay in bribes rather than on the quality of its products and services, law-abiding companies are placed at a com-

petitive disadvantage—and consumers lose. For these and other reasons, enforcing the FCPA is a continuing priority at the

Department of Justice (DOJ) and the Securities and Exchange Commission (SEC).

e Guide is the product of extensive eorts by experts at DOJ and SEC, and has beneted from valuable input from

the Departments of Commerce and State. It endeavors to provide helpful information to enterprises of all shapes and sizes—

from small businesses doing their rst transactions abroad to multi-national corporations with subsidiaries around the world.

e Guide addresses a wide variety of topics, including who and what is covered by the FCPA"s anti-bribery and accounting

provisions;the denition of a “foreign ocial"; what constitute proper and improper gis, travel and entertainment expenses;

the nature of facilitating payments; how successor liability applies in the mergers and acquisitions context; the hallmarks of

an eective corporate compliance program; and the dierent types of civil and criminal resolutions available in the FCPA

context.On these and other topics, the Guide takes a multi-faceted approach, setting forth in detail the statutory require-

ments while also providing insight into DOJ and SEC enforcement practices through hypotheticals, examples of enforce-

ment actions and anonymized declinations, and summaries of applicable case law and DOJ opinion releases.

e Guide is an unprecedented undertaking by DOJ and SEC to provide the public with detailed information about

our FCPA enforcement approach and priorities. We are proud of the many lawyers and sta who worked on this project,

and hope that it will be a useful reference for companies, individuals, and others interested in our enforcement of the Act.

November 14, 2012

Assistant Attorney General

Criminal Division

Department of JusticeDirector of EnforcementSecurities and Exchange Commission

Chapter 1:

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

The Costs of Corruption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Historical Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

National Landscape: Interagency Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Department of Justice

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Securities and Exchange Commission

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Law Enforcement Partners

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Departments of Commerce and State

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

International Landscape: Global Anti-Corruption Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

OECD Working Group on Bribery and the Anti-Bribery Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

U.N. Convention Against Corruption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Other Anti-Corruption Conventions

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Chapter 2:

THE FCPA: ANTI-BRIBERY PROVISIONS . . . . . . . . . . . . . . . . . . . . 10

Who Is Covered by the Anti-Bribery Provisions?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Issuers—15 U.S.C. § 78dd-1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Domestic Concerns—15 U.S.C. § 78dd-2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Territorial Jurisdiction—15 U.S.C. § 78dd-3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

What Jurisdictional Conduct Triggers the Anti-Bribery Provisions?. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

What Is Covered?—The Business Purpose Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

What Does “Corruptly" Mean?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

What Does “Willfully" Mean and When Does It Apply? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

What Does “Anything of Value" Mean?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Cash

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Gifts, Travel, Entertainment, and Other Things of Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Charitable Contributions

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Who Is a Foreign Ofcial?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Department, Agency, or Instrumentality of a Foreign Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Public International Organizations

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

How Are Payments to Third Parties Treated? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

What Afrmative Defenses Are Available? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

The Local Law Defense

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Reasonable and Bona Fide Expenditures

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

What Are Facilitating or Expediting Payments? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

Does the FCPA Apply to Cases of Extortion or Duress? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

Principles of Corporate Liability for Anti-Bribery Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

Parent-Subsidiary Liability

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

Successor Liability

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

Additional Principles of Criminal Liability for Anti-Bribery Violations:

Aiding and Abetting and Conspiracy . . . .34

Chapter 3:

THE FCPA: ACCOUNTING PROVISIONS . . . . . . . . . . . . . . . . . . . . 38