COMPLIANCE / Going back to the FCPA’s roots where it all began: history, impact on world compliance practices, and the future

FCPA begining @ CEEEC 2020

[W]e in the United States are in a unique position to spread the gospel of anti-corruption, because there is no country that enforces its anti-bribery laws more vigorously than we do.” 

—  Lanny A. Breuer, U.S. Assistant Attorney General (Nov. 16, 2012). 

The U.S. Foreign Corrupt Practices Act can be traced to the Watergate scandal of the 1970s that brought down President Nixon and subsequently revealed what was called at the time “corrupt capitalism” — widespread use of bribery and slush funds by the largest U.S. companies to win business at home and abroad, often undermining the official U.S. foreign policy in the midst of the Cold War.  

The 1980s and 1990s saw infrequent targeted FCPA enforcement actions against U.S. companies and individuals, which were not widely publicized. Yet these occasional cases resulted in a push to “level the playing field,” which led to the two FCPA amendments in 1988 and 1998 and the adoption of the first international anti-corruption treaties: the Inter-American Convention Against Corruption (1996), OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (1997), and Council of Europe Civil and Criminal Law Conventions on Corruption (1999). 

The FCPA was reinvented, even reborn, in 2000s when the U.S. Department of Justice and then the Securities and Exchange Commission prioritized FCPA enforcement, ratcheted up the penalties and individual liability risks for executives, expanded the scope and understanding of the law and its jurisdictional bounds through numerous out-of-court settlements, whose details were posted online, widely publicized and carefully studied for clues of DOJ’s and SEC’s enforcement plans and trends. As a result, this born-again FCPA changed how international business is done around the world, propelling the FCPA to be among the top concerns for senior executives and corporate boards and ensuring job security for outside and in-house counsel, compliance officers and former enforcement officials.  

The robust FCPA enforcement with its large penalties against a broad range of companies, many of which are based outside the United States, has met with numerous criticisms outside the United States ranging from the claims that  the U.S. government (i) is arrogantly imposing its own sense of morality on the rest of the world, (ii) using the FCPA as a blunt political tool or a way to protect U.S. businesses from foreign competition, (iii) usurping enforcement authority of foreign law enforcement agencies, (iv) is oblivious to local cultures, norms, and customs, (v) addressing the supply but not the demand side of business corruption, (vi) to the law’s failure to effect true change in how business is done in corrupt jurisdictions, (vii) choosing formalistic compliance with its high economically unjustified costs over deep anticorruption reforms rooted in real behavioral changes and shifts in local cultural perceptions of corruption. And yet, the FCPA persists in maintaining rapt attention of business people in the United States and abroad, and has served as a catalyst for the adoption of similar legislation in other countries and numerous international conventions.  

Is there merit to the criticisms? Is there a better way? What does the future hold for the FCPA and the fight against international corruption?