Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act is the United States' primary Federal law of significance in the matters of bribery and transparency with regard to dealings with foreign officials. The purpose of the Foreign Corrupt Practices Act is relatively simple: to limit or eliminate corrupt payments made from businesses to foreign officials in order to obtain or maintain business contracts. In other words, the Foreign Corrupt Practices Act exists to eliminate the bribery of foreign officials by American businesses. The Foreign Corrupt Practices Act was originally instituted in 1977, after an investigation by the Securities and Exchange Commission, which found that over 400 companies in America admitted to having made "questionable or illegal payments in excess of $300 million to foreign government officials, politicians, and political parties." Not only were these practices unethical, but they were undermining the legitimacy of the overall American business system, as other American businesses appeared prone to using bribes in foreign markets. Thus, the Foreign Corrupt Practices Act was put into effect in order to reduce such clearly corrupt practices. The Act was very effective, as in several instances criminal and civil charges were brought up against companies that had used bribes in foreign markets, and many companies since began to implement policies within their own companies in order to prohibit or prevent such behavior in the future. While the Foreign Corrupt Practices Act was quite effective at reducing corruption from American businesses, one of the flaws of the Act was that it did nothing to prohibit other foreign businesses from using corrupt tactics of their own in order to secure contracts. American businesses began to suffer because their competitors were able to take advantage of the unethical methods that the Foreign Corrupt Practices Act forbade. As a result, America began to ask its major trade partners to implement their own legislation similar to the Foreign Corrupt Practices Act, which then occurred when the United States and thirty-three other nations all signed the Organization of Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. While this Convention did not fully come into effect for a few more years, it still provided the desired results, as other nations now had similar prohibitions against corrupt actions in business. Essentially, the Foreign Corrupt Practices Act makes illegal all instances of bribery towards foreign officials for the sake of increasing business. It also has a provision requiring some companies whose securities are listed in the United States to then meet certain accounting practices. Furthermore, the Foreign Corrupt Practices Act actually does allow for certain types of payments, labeled "grease payments," which are payments made to foreign officials specifically for the function of expediting the actions of those foreign officials. The grease payment cannot be made to get the foreign official to do something he wasn't already doing; it can only be used to increase the speed with which the foreign official does something which he was otherwise obligated to do, but not obligated to do with any particular time constraint. These grease payments, however, may still be illegal based upon the laws and regulations of the foreign official's country.