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Impacts Of Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act (also known as FCPA) was introduced in 1977 in the United States. The act has two main provisions. The first deals with transparency requirements in the accounts of issuers who are liable under the Securities Exchange Act of 1934. The second deals with the offenses related to bribery of foreign officials. The Act was revised in 1988.

The anti-bribery provisions of the Act apply to each and every person living in the United States. The Act makes it illegal for any person to bribe a foreign government official in order to obtain or retain any business. It is because of the FCPA that the corrupt practices of bribing officials have been significantly reduced since the act was introduced. The Act deals with bribes to government officials and does not include the ambit payments to people who are not government servants. The actions for which bribes cannot be paid includes obtaining licenses or permits, getting the good passed through customs, processing of official papers and providing protection from the police.

The anti-bribery provisions of the FCPA are enforced by the Department of Justice. The Department can accuse anyone who violates the provisions of Act. The accused in that case have to prove that the payment was made in accordance with the laws and that the payment was not unofficial. The people who fail to prove their innocence are penalized under the provisions of the Act. In fact, some US companies have been fined up to $2- million while individuals have been fined up to $1-million. They have also been imprisoned in severe cases.

Companies have to keep an accounting system that accurately records each and every transaction. Hence, the Act has discouraged companies from making illegal transactions which are also known as "slush funds". Misrepresentation of expenses and wrongly labeling payments is strictly prohibited by the Act. The accounting provisions of the Act are enforced by the the Securities and Exchange Commission (SEC). The penalties for violating the Act are almost the same as those imposed by the Securities and Exchange Commission. These penalties normally don't include imprisonment.

The United States has stood firmly behind the Act and has continually discouraged the bribery of foreign government officials. As a result, many citizens (especially businessmen) have found it to be a competitive disadvantage when they doing business in foreign markets. Some foreign competitors offer bribes to government officials and also deduct these payments as business expenses to get deductions from their income taxes.. The commission was getting many complaints of this type.

In 1996, the Chamber of Commerce adopted new rules for extortion and bribery practices and encouraged companies to adopt them. Also the General Assembly in December 1996 pledged to deny tax deductions of bribes offered and created stricter penalties for officers who accepted bribes.