Enacted in 1977, the Foreign Corrupt Practices Act (FCPA) serves to prevent the payment of bribes from US corporations to foreign government or political entities for the purpose of securing or retaining business. The act has a global jurisdiction and extends to publicly traded companies and their executive officers, directors, employees, and stockholders. The FCPA also applies to a company’s agents, which may include distributors, consultants, joint-venture partners, and other third-party associates.
The US Securities and Exchange Commission (SEC) and the Department of Justice share the responsibility of enforcing the FCPA, which consists of two provisions. The act’s anti-bribery provision falls under the enforcement of the Department of Justice, while the SEC manages the enforcement of the accounting provision. Moreover, the SEC maintains a specialized unit within its Enforcement Division for the purpose of FCPA regulation. Under the FCPA’s accounting provisions, issuers must keep accurate records of all assets and transactions. In addition, they must maintain a system of internal controls to ensure sufficient documentation. These internal regulatory guidelines work to ensure that all transactions receive proper authorization, in addition to requiring proper oversight of all asset management activities.
Violation of the FCPA may result in civil enforcement against the infringing issuer. The SEC may take action against violating corporations and their officers, managers, shareholders, and personnel, and consequences often include the obligation to relinquish any profits gained from the illegal practices.