Foreign Corrupt Practices Act
What Is the Foreign Corrupt Practices Act (FCPA)?
Foreign Corrupt Practices Act (FCPA) is a U.S. federal law that prohibits companies and individuals from bribing foreign government officials in order to obtain or retain business advantages.
The law was enacted in 1977 to address concerns about corporate bribery and corruption in international business transactions.
FCPA applies to:
- U.S. companies and citizens
- Foreign companies listed on U.S. stock exchanges
- Individuals or businesses conducting certain activities within the United States
The law also requires companies to maintain accurate financial records and internal accounting controls.
Why It Matters
Foreign Corrupt Practices Act promotes ethical conduct and transparency in global business.
The law helps ensure that companies compete fairly in international markets rather than gaining advantages through bribery or corrupt practices.
FCPA enforcement has significant implications for multinational corporations, investors, and global financial markets.
Companies that violate the law may face substantial fines, legal penalties, and reputational damage.
How Foreign Corrupt Practices Act (FCPA) Works
Foreign Corrupt Practices Act prohibits offering or providing anything of value to foreign officials in order to influence business decisions.
Example: A company attempting to secure a government contract in another country cannot provide money, gifts, or other benefits to government officials in exchange for favorable treatment.
The law also requires companies to maintain accurate financial reporting and internal controls to prevent hidden payments or fraudulent accounting practices.
Enforcement of FCPA is primarily handled by the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC).
FCPA vs Domestic Anti-Bribery Laws
FCPA → Applies to bribery involving foreign officials and international business
Domestic anti-bribery laws → Apply to corruption within domestic government operations
FCPA specifically targets corruption in international business transactions.
Related Terms
- Corporate Governance
- Securities and Exchange Commission (SEC)
- Financial Reporting
- Compliance
- Anti-Corruption Law
