DOJ and SEC issue long-awaited guidance for companies on the FCPA

FCPA Alert

Thirty-five years after its initial enactment in 1977, the Department of Justice  and Securities Exchange Commission have issued their long-awaited guidance on the Foreign Corrupt Practices Act. 


The 120-page manual, entitled A Resource Guide to the U.S. Foreign Corrupt Practice Act (the “Guide”) attempts to address the years of repeated requests made by corporations and individuals for clarification regarding the many “gray areas” surrounding how the FCPA is now, and in the future might be, applied and enforced by the government.  But the Guide, true to its name, is more of a “resource guide” than it is new “guidance,” as it provides a concise overview of the current state of the law and many of the government’s previously stated positions regarding the expansive application and enforcement of the FCPA.


The Guide’s stated purpose is to provide, “a multi-faceted approach, setting forth in detail the statutory requirements while also providing insight into DOJ and SEC enforcement practices.”  The Guide discusses a variety of topics, including the FCPA anti-bribery and accounting provisions, other related US laws, the government’s guiding principles on enforcement, penalties and sanctions, potential resolutions with DOJ and SEC, the FCPA whistleblower provisions and the DOJ Opinion Procedure.  While the matters discussed in the Guide do not constitute binding rules or regulations, the Guide provides an overview of the key areas of the FCPA currently being litigated, some trends in FCPA enforcement actions and the impact of recent case law. Below is a summary of some of the key areas discussed in the Guide.


Corruption generally


The Guide reaffirms the government’s position with respect to corruption, which is, simply put, “corruption is bad for business.”  The Guide warns of the dangers corruption poses to the competitive nature of the market.  The Guide also includes a high-level outline of the US anti-corruption enforcement regime and international anti-corruption conventions.


Jurisdictional reach of the FCPA


To date, regulators have relied upon various different jurisdictional theories to assert jurisdiction over a wide-category of defendants.   Not surprisingly, the Guide reiterates the government’s expansive view on the type of conduct that will trigger territorial jurisdiction under the FCPA (e.g., jurisdiction over “any person” committing an act in furtherance of a bribe within the US).  The Guide specifically states that placing a telephone call or sending an e-mail, text message, or fax to, from, or through the US will be considered “interstate commerce” under the Act.  In addition, wire transfers involving the US banking system or traveling across US borders will provide sufficient nexus to the US to invoke jurisdiction under the FCPA.


Business purpose test


While the FCPA has always prohibited payments to assist a company in obtaining or retaining

business for or with, or directing business to, any person, it also prohibits payments to foreign officials for the purpose of securing “any improper advantage.”   The Guide provides a series of classic examples of actions that will satisfy this business purpose test, including (1) winning a contract; (2) influencing the procurement process, (3) evading taxes or penalties; (4) influencing the adjudication of lawsuits or enforcement actions; and (5) obtaining exceptions to regulations.  The Guide also adds slightly less established examples such as seeking to avoid rules for importation, or gaining access to non-public bid tender information.


Mens rea standard for corporate criminal liability


Despite calls from the business community, the Guide reaffirms that willfulness is not required to establish corporate criminal liability.  Only proof of corrupt intent must be shown.


 Value of bribe to foreign official


It has long been established that the FCPA does not contain a de minimus exception as to the amount of a bribe required to violate the FCPA.  The Guide does not depart from this position, but does emphasize that DOJ and SEC have discretion to determine which cases further law enforcement priorities and that the pattern of DOJ and SEC enforcement actions has focused on “small payments and gifts only when they comprise part of a systematic or long-standing course of conduct that evidences a scheme to corruptly pay foreign officials to obtain or retain business.”


Hospitality and gifts


The Guide reaffirms that the FCPA does not generally prohibit hospitality or the giving of gifts; it then provides examples (based on past enforcement actions) where hospitality or gifts would constitute improper FCPA payments.  With respect to hospitality, the government has pursued enforcement actions where the expenditures were made in combination with other conduct signifying systematic bribery or clear indicia of corrupt intent.  With respect to gifts, enforcement actions have focused on single instances of large, extravagant gifts or the wide-spread giving of small gifts showing a pattern of bribes.


Definition of foreign official


There has been much discussion regarding what “instrumentalities” of a foreign government qualify as foreign officials under the FCPA.  Various business groups had called for a bright-line test to allow companies to better assess risks and efficiently allocate scarce compliance resources.  The Guide does not provide this level of certainty to the market, but instead reaffirms recent case law (most notably from the Aguilar and Carson cases in the Southern District of California) holding that a “fact- specific analysis of an entity’s ownership, control, status and function” is required.  Specifically, the Guide lists 11 factors that should be considered.  While no one factor is dispositive, companies that are majority owned by a foreign government or companies where a foreign government has substantial control over key areas in the company (such as expenditures and operational decisions), in the government’s view will likely qualify the entity as an instrumentality of a foreign government.


Facilitation payments


The scope of the exception for “facilitation payments” has long been a murky area with companies and practitioners struggling to determine what types of payments the government will view to  fall within what the government has repeatedly emphasized to be a narrow exception in the law.  The Guide provides a few examples on what types of “routine governmental actions” will constitute facilitation payments under the FCPA.  The Guide also notes that it is the purpose of the payment, rather than its value that will determine whether a payment qualifies as a facilitation payment.  Notably while the FCPA contains an exception for facilitating payments, the laws of many other countries, including the UK Bribery Act do not recognize any such exception.  Likely in recognition of this fact, as well as pressure from these countries to eliminate this exception in the FCPA, the Guide advises companies to prohibit or discourage the use of facilitating payments, to the extent possible.


Successor liability


The Guide describes the recent enforcement trends regarding successor liability.  Specifically, it notes that DOJ and SEC have declined to bring enforcement actions against companies in the merger and acquisition context where the companies have voluntarily disclosed, remediated conduct, and cooperated with the government.  Importantly, the Guide further states that “DOJ and SEC have only taken action against successor companies in limited circumstances, generally in cases involving egregious and sustained violations or where the successor company directly participated in the violations or failed to stop the misconduct from continuing after the acquisition.”  The Guide also reminds acquiring companies of their obligation to conduct robust due diligence.


Compliance programs


The Guide reaffirms that the government’s previously articulated position (and that articulated in the Federal Sentencing Guidelines) that it will consider the adequacy of a company’s compliance program when considering whether or not to bring formal charges and the amount of a penalty.  In determining the effectiveness of a compliance program, DOJ and SEC will look at three basis questions: (1) “Is the company’s compliance program well designed?; (2) “Is it being applied in good faith?”; and (3) “Does it work?”  The goal of a compliance program should be to “allow the company generally to prevent violations, detect those that do occur and remediate them promptly and appropriately.”  Conspicuously the Guide stops far short of endorsing a compliance defense similar to the one found under the UK Bribery Act.


Declination decisions


The government has rejected requests to provide detailed statistics concerning the number of cases where it has declined to prosecute or take action against an individual or corporation.  Instead, the Guide provides five anonymized examples of recent matters where DOJ and SEC have declined to pursue an enforcement action against a company.  Each example includes a list of factors considered by the government in making its decision, but the descriptions are generic and devoid of details regarding the facts of the case thus providing little actual guidance.  However, in public DOJ and SEC have acknowledged that scores of declinations have not been made public and will not be made public in the future. 


Use of other statutes


The Guide contains a discussion of other laws, such as the Travel Act and other tax laws, under which government has brought related charges as part of FCPA enforcement. The Guide notes that businesses and individuals should be aware that the government can bring cases under these laws even if all the elements of an FCPA violation are not present.


What the Guide doesn’t cover


What was dubbed the “rules of the road” contains few direct responses to the detailed wish-lists previously presented to the government by various interest groups, including the US Chamber of Commerce.  Some of the more notable exclusions, include the following:


  • Clear, uniform, bright-line test for who constitutes a foreign official
  • Compliance Program defense
  • Blanket protection for acquiring companies




While useful guidance, and a welcome addition to the Lay Person’s Guide (which previously stood as the government’s main, and most accessible, explanation of the FCPA), the Guide breaks little new ground, and companies should continue to consult with experienced counsel so as to properly understand the FCPA and how it may impact their business.


To read the Guide, visit this page.


For further information about the Guidelines, please contact:


Sharie Brown

Jonathan King

Kiera Gans

Mitka Baker