These laws stand as formidable barriers against bribery, with sweeping provisions that extend far beyond their respective borders, influencing global corporate behaviour.
While both the FCPA and the UKBA share a common goal (or rather objective), of tackling bribery and corruption in all its guises, they do however differ in respect of their scope, enforcement mechanisms, and due diligence requirements.
In this article, we will compare FCPA due diligence requirements with those of the UK Bribery Act, focusing on the key distinctions between the two regulatory frameworks and their overarching impact on businesses.
Overview of the FCPA and UKBA
Passed in 1977,
the Foreign Corrupt Practices Act is a United States federal law that makes it an offence for US companies and individuals to bribe foreign officials to gain business advantages. Under certain circumstances, the FCPA’s jurisdiction also extends to non-US enterprises and individuals, such as those who would knowingly use US communications systems and/or banking networks to facilitate their illegal activities.
The UK Bribery Act, enacted in 2010, makes it a criminal offence for a UK national or an individual located in the UK to offer or receive a bribe, either directly or indirectly.
Like the FCPA, the UKBA is a comprehensive piece of legislation, one that covers improper transactions that have taken place in the UK or abroad. However, unlike the FCPA, the UKBA applies to cases of both public and private sector bribery.
Given this, in what other ways do these anti-bribery laws diverge? Let’s explore this question further.
Scope of Application
In terms of scope, both the FCPA and UKBA have the power to flex their extraterritorial might – reaching far beyond their respective borders. Their shared global governance (for lack of a better term) enables them to pursue and penalise individuals and organisations worldwide. However, the devil lies in the (nuanced) detail, or rather, in the specific conditions under which each law applies.
FCPA: Applies to both US publicly traded companies (those listed on a stock exchange) and privately-held companies. Additionally, it also applies to non-US individuals and companies that violate the Act while within US jurisdiction.
UKBA: Applies to any business or individual operating in the UK. Moreover, the Act covers illegal activities by foreign entities with connections to the UK – regardless of where the bribery occurs.
When it comes to scope and jurisdiction, the UKBA casts a broader gaze over bribery compared to the FCPA. While it largely aligns with many FCPA regulations (e.g. prohibiting bribery of foreign officials), it also extends to misconduct within the private sector and covers a greater territorial reach.
Bribery and Corruption Provisions
Key provisions of the FCPA include:
- Anti-bribery Provisions: The Act makes it illegal to offer, promise or provide anything of value to a foreign official with the intent to obtain or retain some form of preferential treatment or business advantage.
- Accounting Provisions: This area of FCPA due diligence stipulates that companies must maintain accurate books and records relating to financial transactions. Failure to provide the necessary records, as well as adequate internal controls, is deemed a criminal offence even if there is no violation of the anti-bribery statute.
The key provisions of the UKBA include:
- Bribery of Public Officials: As we have established, like the FCPA, the UKBA criminalises the bribery of foreign public officials. However, this ruling also applies to domestic public officials.
- Bribery Among Private Individuals: The UKBA also deems it an offence to offer, promise or give a bribe to somebody in a private business context.
- Corporate Liability: One of the more distinct features of the UKBA relates to the corporate liability provision. Essentially, companies that fail to prevent bribery from occurring are held accountable, even in instances where individuals within the company are responsible.
So, what conclusions can we draw from this?
Well, compared to the UKBA, the FCPA places a particular onus on addressing bribery of foreign officials - focusing intently on the aspect of corruption. In contrast, the UKBA adopts a broader stance, one that encompasses not only the bribery of foreign officials but that of domestic officials, misconduct within the private sector and (most notably) a pronounced emphasis on corporate liability. This, in turn, underscores to companies the absolute necessity of implementing
comprehensive anti-bribery and corruption measures.
Does this suggest that corporate liability is not a key consideration of the FCPA?
The answer…. an emphatic no. Now let’s examine why that is.
Corporate Liability
FCPA: While individual liability and accountability may take precedence, the FCPA does indeed hold organisations accountable for wilful violations of its provisions.
For example,
CNBC reported that RTX subsidiary Raytheon agreed to pay more than $950 million to settle foreign bribery. The article outlines how “Raytheon was charged in New York federal court with a scheme to bribe a high-level government official in Qatar to obtain lucrative business there, and with failing to disclose the bribes in export licensing applications with the State Department as legally required.”
Corporate liability, although not explicitly stated as in the UKBA, arises from the expectation that companies uphold the necessary internal controls and recordkeeping practices.
UKBA: Corporate liability is a prominent provision of the UKBA framework, it holds companies criminally liable for failing to prevent bribery – regardless of intent. For example, if an individual associated with a company or partnership engages in activity which amounts to an offence under Section 1 (active bribery) or Section 6 (bribery of a foreign official) of the Bribery Act, that company or partnership could be liable to prosecution for failing to prevent bribery.
A stringent piece of much-lauded and robust legislation, Section 7 of the Bribery Act underscores the need for companies to implement rigorous anti-bribery processes.
While both the FCPA and the UKBA hold corporations accountable for bribery by their employees or agents, it is the UKBA’s stricter and much broader approach to corporate liability that sets it apart.
Due Diligence Expectations
FCPA Due Diligence: Organisations conducting business under FCPA jurisdiction are required to perform thorough due diligence checks – whether it be on a target in a merger and acquisition context or when vetting a third-party contractor. In any case, it is an absolute necessity for businesses to comprehensively evaluate, identify and mitigate the risk of bribery. This includes but is not limited to:
- Conducting adequate background checks
- Thoroughly assessing the integrity and reputation of potential partnerships
- Evaluation of internal policies and procedures
- Ensuring employees are thoroughly trained in financial crime compliance relating to anti-bribery and corruption
- Reviewing the financial and transactional history of third parties
- Identifying corruption risks in certain regions or industries
- Implementing anti-corruption provisions into contracts
- Ongoing vigilance in the form of periodical reviews and audits
UKBA Due Diligence: As with the FCPA due diligence markers outlined above, the UKBA also mandates that organisations take a proactive and holistic approach to managing bribery risks. However, as previously stated, the UKBA places a notable emphasis on a company’s ability to prove that it has the necessary procedures in place to prevent bribery and corruption. It is this burden of proof that differentiates the two frameworks in this particular aspect.
Penalties and Enforcement
FCPA: Enforced by the Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC), violations of the FCPA can result in both civil and criminal penalties.
The severity of the penalties imposed can depend on additional factors such as the nature and scope of the violation, the level of cooperation with authorities, and a retrospective evaluation of a company’s compliance and anti-bribery programs.
UKBA: Comparatively, the UK’s Serious Fraud Office (SFO) and Crown Prosecution Service (CPS) are tasked with enforcing the provisions of the Bribery Act. Like the FCPA, the UKBA also imposes tough penalties for breaches of its anti-bribery provisions. Companies found guilty of such offences could face unlimited fines, while individuals may be imprisoned for up to 10 years. Extenuating factors, like the ones mentioned previously, may influence the severity of the penalties.
It is clear that both the FCPA and the UKBA take violations of their respective anti-bribery laws very seriously and their stringent punishments reflect this commitment. That being said, the UKBA’s more liberal (or rather flexible) approach to fines compared to the FCPA’s capped penalties, seemingly reinforces the UKBA’s unflinching stance on punishment of bribery and corruption as a whole.
Why Doing Your Due Diligence Matters
Given the far-reaching implications of the Foreign Corrupt Practices Act and the UK Bribery Act, professionals, entrepreneurs and business leaders must stay informed and take proactive steps to remain compliant with anti-bribery and corruption laws. By having a robust compliance program in place, including thorough due diligence processes, businesses can better mitigate risks, address potential red flags and help fortify themselves should they be faced with scrutiny or legal challenges.
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FAQ
Does FCPA apply to non-US citizens?
Yes, the Foreign Corrupt Practices Act (FCPA) applies to non-U.S. citizens in certain cases. It covers foreign companies and individuals if they commit corrupt acts while in U.S. territory or if they use U.S. financial systems (e.g., U.S. banks, emails, or wires) to facilitate bribery. Additionally, foreign subsidiaries of U.S. companies and agents acting on behalf of U.S. entities can fall under FCPA jurisdiction. Non-U.S. issuers trading securities on U.S. exchanges are also subject to its provisions.