Facilitation Payments Still Permitted Under FCPA

“Facilitation payments” made to customs officers are common in some parts of the world, and, strictly speaking, they don’t violate the U.S. Foreign Corrupt Practices Act (FCPA). But there are complications. The Securities and Exchange Commission published guidance on the issue that states, “The FCPA does not apply to any ‘facilitating or expediting payment,’ the purpose of which is to expedite or secure the performance of a ‘routine governmental action.’” That includes common payments to ordinary officials in foreign countries to complete an action that was bound to be completed in the first place.

That said, the SEC admonishes companies participating in facilitation payments to “have appropriate internal controls and compliance procedures designed to provide that such payments satisfy the exception for routine governmental action and are properly approved and documented in the issuer’s books and records.”

Although, updated guidance from the SEC and the Department of Justice issued in November 2012 continues the exception for facilitation payments, the two agencies have used the settlement process through which most FCPA cases are resolved (instead of litigation) to narrow the scope of approved payments, Mondaq notes in a commentary. Specifically, Mondaq says that enforcement is having a greater role in determining the scope of the law than courts through non-prosecution agreements between the agencies and defendants. Cases have included debt collection (SEC v. Summers) and scheduling and performance of required inspections (United States v. Westinghouse Air Brake Technologies).

It’s also critical to know foreign countries’ anti-bribery laws, which in some cases are stricter than the FCPA.

Even if cases don’t go to court, there can be substantial legal fees involved. Does your commercial insurance policy adequately cover your business for arbitration expenses? And have you reviewed your bookkeeping procedures to ensure any payments you do make to foreign officials are documented properly and fully?

At Roanoke Trade, you will find not only insurance to meet your cargo and shipping needs, you will also find experts on international trade and risk management who can help you review your financial protection to make sure you are undertaking the best risk practices and securing the most appropriate insurance possible.

We invite you to learn more about us, our experienced talent in this highly specialized area, our creative solutions, and the value we will bring to you and your clients. Please contact us at 1-800-ROANOKE (800-762-6653).

Sources: SEC, MONDAQ