2. Foreign Corrupt Practices Act
Anti-Bribery Provisions Accounting & Internal
• Cannot pay or offer to Controls
pay money or anything of • Must make and keep
value books, records and
• Directly or indirectly accounts
• To any foreign • In reasonable detail which
official/foreign political accurately and fairly
party reflect transactions and
dispositions of company’s
• To obtain or retain business assets
3. FCPA – Anti-Bribery Provisions
8 elements:
1. Use of Instrumentality of interstate commerce
2. To authorize a payment, make a payment, offer a payment or promise a payment;
3. Of money or anything of value
4. With corrupt intent
5. To a covered person
6. By a covered person (that’s you)
7. To influence any act or omission of the covered person, induce covered person to do or omit
an act in violation of his lawful duty, use influence a foreign government, or secure any
improper advantage
8. In order to assist in obtaining or retaining business for or with, or directing business to, any
person.
4. What’s not a payment to facilitate?
“routine governmental actions” are not FCPA violations:
• Obtaining permits, licenses or other official documents
• Processing governmental papers like visas and work orders
• Providing police protection
• Mail pick up and delivery
• Phone service, water, power
• Loading or unloading cargo
• Scheduling inspections associated with contract performance or
transit of goods across country
5. Common Red Flags
• Excessive commissions to third party agents or consultants
• Unreasonably large discounts to distributors
• “Consulting agreements” that include very vaguely described services
• Third party consultant in a different line of business
• Third party related to or closely associated with foreign official
• Third party gets involved after request or insistence of foreign official
• Third party is a mere shell company, usually incorporated offshore
• Third party requests payment to offshore bank accounts
6. Some Safeguards
• Pay all costs directly to travel and lodging vendors, or reimburse costs only on
presentation of receipt
• Don’t advance funds or pay for reimbursements in cash
• Ensure stipends are reasonable approximations of costs likely to be incurred
• Make expenditures transparent, within the company and to the foreign government.
Ensure costs and expenses are accurately recorded in the company’s books and
records
• Do not ever condition payment on any action by a foreign official
• Obtain written confirmation that payment of the expenses is not contrary to local
law on questionable items
• You are responsible for the actions of your agents and contractors
7. Know Your Alphabet
OFAC – Office of Foreign Assets Control
SDN – Specifically Designated National List
BIS – Bureau of Industry and Security
US DOC – U.S. Department of Commerce
EAR – Export Administration Regulations
ITAR – International Trafficking in Arms Regulations
CCL – Commerce Control List
8. Denied Persons List
• http://www.bis.doc.gov/dpl/default.shtm
• “Know Your Customer”
Check the parties to your transaction (including freight
forwarders, intermediate consignees, and the ultimate
consignee) against key U.S. Government Lists to Check to
identify parties subject to denial orders or otherwise
restricted or prohibited from engaging in U.S. export
transactions.
Look for “Red Flags”:
9. • The customer or its address is similar to one of the parties found on the Commerce Department's
[BIS's] list of denied persons.
• The customer or purchasing agent is reluctant to offer information about the end-use of the item.
• The product's capabilities do not fit the buyer's line of business, such as an order for sophisticated
computers for a small bakery.
• The item ordered is incompatible with the technical level of the country to which it is being shipped,
such as semiconductor manufacturing equipment being shipped to a country that has no electronics
industry.
• The customer is willing to pay cash for a very expensive item when the terms of sale would normally
call for financing.
• The customer has little or no business background.
• The customer is unfamiliar with the product's performance characteristics but still wants the product.
• Routine installation, training, or maintenance services are declined by the customer.
• Delivery dates are vague, or deliveries are planned for out of the way destinations.
• A freight forwarding firm is listed as the product's final destination.
• The shipping route is abnormal for the product and destination.
• Packaging is inconsistent with the stated method of shipment or destination.
• When questioned, the buyer is evasive and especially unclear about whether the purchased product
is for domestic use, for export, or for reexport.
10.
11. Entity List
http://www.bis.doc.gov/entities/default.htm
The Export Administration Regulations (EAR) contain a list of
names of certain foreign persons – including businesses,
research institutions, government and private organizations,
individuals, and other types of legal persons – that are
subject to specific license requirements for the export,
reexport and/or transfer (in-country) of specified items
Must get a license from the US DOC (or other agencies) to
do business with a listed person
12. OFAC’s SDN List
A list compiled by the Treasury Department, Office of
Foreign Assets Control (OFAC). OFAC’s regulations may
prohibit a transaction if a party on this list is involved.
In addition, the Export Administration Regulations require a
license for exports or reexports to any party in any entry on
this list that contains any of the suffixes "SDGT", "SDT",
"FTO", "IRAQ2" or "NPWMD".
If on the SDN List, their assets are blocked and U.S. persons
are generally prohibited from dealing with them
13. David J. Garrett, Special Counsel
4141 Parklake Ave., Suite 200
Raleigh, NC 27612
(919) 755-1800
dgarrett@nexsenpruet.com
