Advocates of the Foreign Corrupt Practices Act (FCPA) consider it a crucial anti-bribery law that ensures corporate integrity in international business. In contrast, opponents argue that it unfairly burdens American firms, favoring foreign competitors.
This past Monday, President Trump voiced his opinion. “It looks good in theory but is a disaster in practice,” he remarked while signing an executive order that freezes the application of the 1977 legislation. “This will lead to significantly more business opportunities for America.”
While the President lacks the power to repeal the law, he can modify its enforcement and reallocate resources within the Justice Department.
His directive imposes a 180-day “pause” on all FCPA investigations while they undergo review. No new investigations are to be initiated during this timeframe. Additionally, the order indicates that it will suspend other Justice Department “actions” related to the law, which may affect ongoing prosecutions, although specifics remain ambiguous.
Trump stated that the pause is essential to provide his administration with time to develop new “reasonable” enforcement guidelines that don’t disadvantage U.S. companies in international agreements.
The potential ramifications could be significant, experts suggest, depending on Trump’s future actions.
If he curtails many prosecutions, effectively neutralizing the law, it could benefit U.S. businesses in securing overseas deals. However, this might also damage America’s reputation as a reliable business partner and encourage corrupt leaders in struggling nations to enrich themselves further. Additionally, countries like France, Britain, and Japan may weaken their own anti-bribery regulations to allow their companies to engage in similar practices.
“We are heading into a Wild West scenario,” warned Mark Pieth, a criminal law professor at the University of Basel in Switzerland and an anti-bribery law specialist. “It will be everyone for themselves.”
Specifically, Trump criticized the law’s enforcement as being “excessive and unpredictable,” causing U.S. businesses to face an uneven “playing field” when competing against foreign firms. He also claimed the law was “depleting resources” from law enforcement and undermining U.S. national interests as businesses are impeded from securing deals that provide access to critical assets like deep-water ports and essential minerals.
Duncan Levin, a criminal defense attorney, anticipates that Trump may effectively eliminate the law through inaction.
“He may not be able to abolish the law, but he can choose not to enforce it,” said Levin, who has represented high-profile clients like Harvey Weinstein and Russian oligarch Oleg Deripaska. “I don’t believe this is merely a pause.”
What is the Foreign Corrupt Practices Act?
The FCPA is a federal law that prohibits U.S. companies and individuals from making payments to foreign government officials “to secure any improper advantage” for the purpose of obtaining or retaining business. Enacted in the 1970s, it was designed to combat global corruption following investigations by the U.S. Securities and Exchange Commission revealing that many American firms were making unethical or illegal payments to foreign officials for business favors. The law only mandates that an offer is made, not that a bribe is actually paid.
Over the last five decades, prosecutions under the FCPA have exposed a wide array of bribery cases.
For example, last year, military contractor RTX, previously known as Raytheon, settled charges amounting to over $300 million for allegedly bribing officials in Qatar using fraudulent contracts to cover up its actions.
In 2019, Walmart paid $282 million to resolve allegations stemming from a seven-year probe suggesting it secured approvals to establish stores in Mexico, India, and Brazil by bribing local officials, including a contact dubbed the “sorceress” for her ability to resolve permitting issues.
Who enforces the FCPA?
The FCPA is enforced by the Securities and Exchange Commission, which handles civil violations of bribery laws, and the Department of Justice, which manages both civil and criminal enforcement.
Criminal cases under the FCPA can result in prison sentences of up to 20 years, while companies may face fines that are double the profits from the illegal transaction, according to the National Whistleblower Association. Civil cases, on the other hand, have a lower burden of proof.
Why is the FCPA important?
The FCPA was implemented to shield U.S. businesses from the harmful effects of global corruption associated with bribery.
By banning companies from seeking illegal advantages through payments to foreign officials, and by mandating accurate record-keeping and robust internal accounting controls, the FCPA aims to mitigate corruption costs for U.S. businesses and facilitate fair competition.
Criticisms against the FCPA
President Trump has stated that the law’s enforcement has become “excessive and unpredictable,” creating an uneven competitive environment for U.S. companies against foreign entities. He also noted that it drains law enforcement resources and negatively impacts U.S. national interests by preventing companies from pursuing deals that could provide access to essential assets.
Since the FCPA was established nearly 50 years ago, U.S. businesses have contended that it is more harmful than beneficial, especially in regions where bribe-taking is commonplace. In response to U.S. pressure, allies in the Organization for Economic Cooperation and Development began instituting their own anti-bribery laws, especially after the fall of the Berlin Wall in 1989 led to new business opportunities in previously communist countries.
Ultimately, 40 wealthy nations adopted anti-bribery laws modeled on the FCPA, as noted by Pieth, including provisions to prosecute foreign companies for acts transpiring in third countries. This poses another risk if Trump dilutes the FCPA, Pieth warns. “If a U.S. company engages in bribery due to Trump’s implicit approval, countries like France and Britain are poised to act against that company,” he cautioned. “It could create chaos.”
