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Anti-Corruption Laws & Issues
Corrupt Business Practices
As a core principle, firms must not offer bribes to secure business, nor should they influence clients’ procurement decisions through improper means. However honest their business practices, for any firms performing or interested in performing work for governments around the world, it is particularly important to know about and comply with anti-corruption and procurement integrity laws in effect.
The recent trend in anti-corruption legislation is a zero tolerance environment balanced against a strong tide of corruption. There has been a widening scope of the legislation, along with a tightening of offences and enforcement. There is also greater cooperation between various law enforcement agencies, notably the United States Department of Justice and the United Kingdom Serious Fraud Office.
However, the specter of corruption remains a very serious issue. Data compiled by Transparency International, the international anti-corruption watchdog organization, indicates a serious corruption problem. According to Transparency International, the 2010 Corruption Perceptions Index shows that nearly three quarters of the 178 countries in the index score below five, on a scale from 10 (highly clean) to 0 (highly corrupt). By way of comparison, the United States is ranked 22nd with a score of 7.1. The United Kingdom is ranked 20th with a 7.6.
Anti-Corruption: The Regulatory Regime
International anti-corruption laws usually apply to companies and business entities incorporated or doing business in the country where the laws are enacted, including their employees and third parties acting on their behalf.
While many jurisdictions have adopted anti-corruption and procurement integrity acts, the United States and United Kingdom have the broadest reaching regulatory regimes. Other jurisdictions where firms conduct business have likely adopted similar measures to prohibit public-sector bribery and other corrupt practices. This trend is expected to escalate as a consequence of treaties developed by international organizations such as the Organization for Economic Cooperation and Development ("OECD") and the Organization of American States ("OAS"). In addition, public financing institutions, such as the World Bank, the European Bank for Reconstruction and Development, Asian Development Bank, and others, have adopted similar measures.
U.S.-based firms must comply with the U.S. Foreign Corrupt Practices Act (FCPA) and all local anti-corruption and procurement integrity laws. At its core, the FCPA prohibits offering anything of value to foreign government officials to obtain or retain business.
Key considerations regarding the FCPA include the following:
The FCPA prohibits U.S. companies, their personnel, and others who work for the companies (agents, subcontractors, or partners) from directly or indirectly engaging in corrupt conduct to make or offer improper payments or anything of value (“things of value”), to "foreign" (non-US) government officials, foreign officials of public enterprises, foreign political parties, foreign political party officials, candidates for foreign political office, officials of public international organizations, and members of their families (collectively “Foreign Officials”) for the purpose of:
- influencing any act or decision of such Foreign Official in his/her official capacity to do or omit to do any act in violation of the lawful duty of such official, or securing any improper advantage;
- inducing such Foreign Official to use his/her influence with a foreign government or instrumentality to affect or influence any act or decision of such government or instrumentality;
- in order to assist the U.S. company in obtaining or retaining business with any person.
The FCPA applies to U.S. companies and to individuals who are citizens or residents of the United States.
FCPA also applies to conduct of U.S. companies’ foreign subsidiaries. A U.S. company may be in violation of the FCPA because of the actions of its foreign subsidiaries, affiliates, partners, employees, agents, contractors and representatives. (In some instances, foreign persons are also subject to the FCPA).
Companies with business ties to the United Kingdom face a heightened regulatory regime. The U.K. Bribery Act of 2010 is a new and very stringent anti-bribery act that significantly increases the potential of liability for companies with connections to the U.K.
The key components of the Act are the following:
- Makes bribery of private or public, domestic or foreign, persons illegal;
- Makes receiving a bribe illegal;
- Holds corporate entities to strict liability for failing to prevent bribery;
- Contains no facilitation payments exception
The General Bribery Offenses apply to both foreign and domestic (within U.K.) bribery, and apply to both the bribery of foreign officials and commercial bribery. The specific inclusion of commercial bribery is one of the major differences between the Bribery Act and the FCPA.
Key industry resources regarding corruption, bribery, the FCPA, and the Bribery Act of 2010 are the following: