While it is commonly believed that potential liability under the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA) is limited to situations where an improper payment is made in order to secure foreign government contracts or business, the case law and enforcement actions by U.S. government regulators make it clear that the FCPA may be violated whenever an improper payment is made to a foreign official in order to obtain a general improper advantage over competitors. For example, attempts to secure government licenses, permits or certifications in a foreign country that may be necessary to launch or continue business operations in that country will likely be deemed an effort to “obtain or retain business” in a foreign country for purposes of the FCPA. As such, improper payments to government officials during the course of the licensing or permitting process may lead to an FCPA enforcement action. In one case, payments made to government officials in Turkey to secure government reports and certifications that were necessary for the conduct of business in Turkey were found to be improper when the officials failed to do what was needed to complete certain inspection reports and failed to comply with specific regulatory requirements pertaining to the issuance of the needed certifications. Similarly, in another case a company ran afoul of the FCPA by making improper payments and gifts to foreign government officials that were responsible for exercising discretionary authority over registration and inspection of products as a condition for lawful sale of the products in the foreign country.
All of this means that company compliance programs designed to prevent and detect any improper payments by employees and agents that would violate the FCPA must be carefully reviewed to ensure that the appropriate level of scrutiny is applied whenever the company, or one of its affiliates, discovers that a license, permit or certificate must be obtained from a foreign government to launch or continue business activities in that government’s country. Specific steps include the following:
Companies should independently verify, through communications with competent local counsel, that a specified license, permit or certification is in fact required. It is possible that foreign officials may simply create a requirement that does not really exist in order to obtain improper payments from the company.
The usual caution should be exercised regarding the use of third parties to deal with foreign officials during the licensing or permitting process. Third parties should be vetted for their understanding of, and adherence to, ethical and legal requirements including the FCPA.
Any payments that are earmarked for a license, permit or certification should be made only to the licensing agency directly and the company should obtain appropriate documentation from the licensing agency before making the payment. Any request by an official of the licensing agency to have payments made directly to him or her or to another party other than the licensing agency should immediately raise a “red flag.”
All expenditures made during the course of applying for, and obtaining, a license, permit or certification from a foreign governmental body should be fully and correctly documented on the company’s books and records and made available for audit and inspection.