FCPA Compliance: Don’t misread the debate on facilitating payments

1
2067

Post By: Ernesto Grijalva

The U.S. became the first country to forbid its citizens from bribing foreign governments through the Foreign Corrupt Practices Act of 1977 (“FCPA”). Other anti-bribery laws/treaties have followed suit, bringing all developed countries and most of the rest of the world in alignment. Most prominently, we have seen the addition in 1999 of the OECD Convention on Combatting Bribery (“OECD Convention”), the 2005 United Nations Convention against Corruption (“UNCAC”), with 140 signatories, and the 2010 UK Bribery Act (“UKBA”).

A parallel debate on whether facilitating or “greasing” payments should be exempted from prosecution has been ongoing since the passage of the FCPA, which expressly allows payments “to facilitate or expedite routine governmental action . . .”  Creating a compliance policy that does not expressly prohibit facilitating payments, based on a misreading of the debate or on overestimating the importance of the FCPA’s tolerance, is a recipe for exposing a multinational business to prosecution.

There is a decidedly deliberate worldwide trend toward prohibiting facilitating payments. The FCPA exemption is mirrored in the laws of less than a dozen other countries and the number is shrinking. UNCAC and the UKBA prohibit such payments. The OECD Convention does not expressly prohibit them, but does strongly discourage them. After decades of expressly allowing them, Canada made them illegal in 2017. While Australian federal law allows them, there are important caveats. Australia requires such payments be documented as soon as possible and, contrary to federal law, many Australian states forbid them, overriding the federal law exemption. The trend toward forbidding facilitating payments is most important because of what it signals, i.e. while enforcement of laws prohibiting such payments may be admittedly poor worldwide at the moment, because of the growing attention, prosecutions are likely to become more frequent going forward.

In order to give context to the debate, this trend and the inherent risks in a corporate policy that permits facilitating payments, it is imperative to remember that facilitating, or “greasing” payments are, in fact, bribes. That is why even countries that do not penalize their citizens and domestic businesses for making facilitating payments abroad tend to prohibit the making of such payments to their own government officials. So, while the U.S. might not prosecute a U.S. based business for making a facilitating payment to a Panamanian government office clerk, Panama could.

There are other risks. Here are just a few:

  • In many countries (particularly those practicing civil law), corporate officers can be named personally for criminal violations alleged against a company. An allegation of a facilitating payment, even if permitted by FCPA but prohibited locally, could result in a company executive being unable to travel abroad, pending resolution of the charge.
  • The FCPA has strict reporting requirements. Failure to record a facilitating payment accurately would be a violation of the FCPA while recording it could be an admission of a violation of the foreign jurisdiction’s laws.
  • There is no way to accurately define the fine line at which a payment or gift moves from “facilitating payment” to “bribe.” A $100 payment to a clerk to place a license application in a “Review by Friday” inbox may seem harmless, but will it still appear so if the clerk places a note on it stating “Looks O.K. for approval?”
  • A multinational’s country-by-country approach, with a bifurcated policy that allows facilitation payments in some countries and not others, will inevitably create difficulty defending a company’s tone at the top.

Lead, follow or get out of the way does not accurately portray the options available to a compliance professional. It is our job to lead and the handwriting is on the wall. Regardless of the FCPA’s tolerance, the only tenable option for a U.S. compliance officer is to advise your company that facilitation payments need to be prohibited.

1 COMMENT

  1. Competition is key in American democracy, bribery has no place in competition it takes away from craftsmanship which is what separates the USA from socialist communist government run industry and produces a better product in the end.

Comments are closed.