Foreign Corrupt Practices Act - Essay Example

While the Act was initially seen as being bad for US business abroad, the long-term effects have been for the benefit of US companies both domestically and internationally. The Foreign Corrupt Practices Act (FCPA) of 1977 was implemented to further restrain the practices of American business in the areas of using undue influence in international business. According to the Congressional Research Service the FCPA was, ".enacted principally to prevent corporate bribery of foreign officials" (Seitzinger).

Before the Act was passed, there were cases of corporations using secret funds to influence and bribe foreign officials. The government contended that these illegal payments, ".affected adversely American foreign policy, damaged abroad the image of American democracy, and impaired public confidence in the financial integrity of American corporations" (Seitzinger). The FCPA also reasserted the ideals of fair trade and anti-trust policies by curtailing the unfair practices that might place a corporation in an unfairly advantageous position over a competitor through a corrupt practice.

While these business practices had been outlawed by the array of previous legislative acts, the FCPA codified and focused the illegal activity under one act.The FCPA of 1977, and the amendments of 1988 and 1998, specifically prohibits the bribery of any foreign official and making false or misleading entries into a company's financial records. Prior to the FCPA, companies would use slush funds to make payments to foreign officials to gain a business advantage. Often these payments would be incorrectly described in their accounting practices (Johnson).

In addition the FCPA also expanded the definition of 'foreign official' to include not only highly placed government officials but also private persons who may have a function similar to a government employee. This could include contractors working on government contracts or doing business with a foreign government. The FCPA further outlawed the practice of influencing regulatory policies and the obtaining of permits or licenses through fraud and bribery. The FCPA also further defined and prohibited the practice of "willful blindness" where a company pays money and does not make an inquiry that any reasonable person would make as to the use of said money (Johnson).

The FCPA does not differentiate between a bribe that succeeds and an offer that fails or is declined. The Act defines corruption as the intent to unfairly influence.There are two sections that define the enforcement of the FCPA. There is the criminal provision that is enforced by the US Department of Justice and the civil portion that is enforced by the Securities and Exchange Commission (SEC) ("Foreign Corrupt Practices"). The SEC also has responsibility to monitor and enforce the accounting standards set forth in the Act.

The criminal fines for violation can be quite extensive. The corporation can be fined up to $2 million, while individual violators can face fines of up to $100,000 and be sentenced to 5 years in prison (Shaheen and Geren, 3). Shaheen and Geren further note that the corporation is banned from reimbursing the fines and penalties levied against an individual violation. The fines that can be levied by the SEC for