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The Complexity of Anti-Corruption Laws

2019-04-23 10:32 Tuesday

The 1977 Foreign Corrupt Practices Act prohibited companies from offering bribes to foreign officials "to help retain or obtain business" -- in other words, to pay bribes. There is no legal minimum for such payments, and the fines can be substantial.


Compliance with the law begins with the definition of "foreign public official". Unfortunately, the Department of Justice's guidelines are so broad that there are "no restrictions." They may be officials of any foreign political party or candidates for public office in that country.

While regulators are unlikely to pursue the most absurd cases, companies still have to be extra careful when dealing with foreign individuals. Anyone who works for or on behalf of the government can be considered a foreign public servant. Further down, this definition could include corporations and organizations that are not directly controlled by the government.

The question of what constitutes a bribe seems easier to answer. It is essentially anything of value. When it comes to seizing bribes, the real worry is special treatment such as first-class flights, luxury hotel accommodation and lavish meals. This is one of many grey areas that plague companies that struggle to comply with the law when doing business abroad.

The key to judicious use of law lies in good training and communication. For example, it might be useful to check the air passenger manifest to determine whether an expensive upgrade is a gift to a foreign official (or the official's family).

The second area of risk is in sectors that are inherently more likely to encounter foreign government officials. These companies tend to be heavily involved in cross-border logistics. There are also companies that produce high-value commodities at low costs, such as oil, gold and other precious metals, as well as rare earths.

Every stage of the supply chain, from procurement of raw materials to processing, packaging and sales, presents new opportunities for collusion with government officials.

At the same time, it is critical to maximize the identification of foreign government officials or agency heads, from head of the state to individuals in charge of local affairs. "If you are going to approach a new supplier, sales agent or distribution agent in China, Nigeria or France, you should do due diligence on all these relationships to find out the level of government relations they could constitute."

As tasks become more complex when larger companies are involved, it becomes important to automate the process as much as possible and assign individuals to oversee the work.

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