Gregory T Bryant, CPA and Attorney at Law
Caroline Byrd, Intern
Introduction
In a surprising move, President Trump hit the pause button on enforcing the Foreign Corrupt Practices Act (FCPA), a law that was designed to fight corporate bribery and financial misconduct since 1977. Supporters hail this as a pro-business move. Critics warn it could unleash a corporate free-for-all and create a “Wild West” for international deal-making. But, what exactly is the FCPA, how has it shaped business over the decades, and what might this enforcement freeze mean for companies worldwide?
FCPA Background & Purpose
FCPA is a Carter era law[1]. In 1975, Gulf Oil, Mobil Oil, Northrop, and Lockheed all testified before Congress regarding alleged payments to prominent foreign officials. The CIA was even linked to the Lockheed scandal in Japan. Attempting to balance the need for ethical business practices with the autonomy and independent operation of businesses, Congress passed the FCPA in 1977.
The FCPA has anti-bribery provisions and reporting requirements:
- Anti-Bribery Provisions: Prohibit US and foreign corporations and individuals from offering, promising to pay, or paying anything of value to foreign government officials, political candidates, party officials, or public international organization officials, directly or indirectly, to obtain or retain business or secure any improper business advantage.
- Reporting Requirements: Require issuers (companies with securities registered under the Securities Exchange Act) to (1) maintain books and records that accurately and fairly reflect transactions and dispositions of assets, and (2) devise and maintain an adequate system of internal accounting controls to provide reasonable assurances that transactions are properly authorized, recorded, and accounted for.
It is important to note that Congress carefully framed the law so that it only related to payments to “a narrow category of foreign recipients and those involving foreign government procurement or to influence foreign government legislation or regulations[,]” even though many of the bribes identified in the 1970s fell outside of the FCPA’s scope.
The Reality of the FCPA
In this author’s experiences doing business in Africa, Asia, South America and Eastern Europe, places where bribery is not uncommon, the author has noticed that the person making the bribe (the one spending the money) is not the one who initiated the conversation. Americans, for example, do not come through passport control asking, “who wants a bribe?” when they enter Dar es Salaam. Bribes happen in many less direct ways. For example, if you need spare parts for the machine on the farm or at your factory, you should expect to pay someone with customs to release your goods. If you do not, you will not get your spare parts. This is the reality of it. Unfortunately, in certain locations the economic reality is that you will not be able to accomplish business objectives if you are barred from giving bribes. In these locations, paying “bribes” is a form of cultural conformation.
While the FCPA has been in effect since 1977, enforcement was initially limited and sporadic until a significant shift in enforcement priorities occurred in the mid-2000s. Since 1977, the Department of Justice and SEC have brought a combined total of 773 enforcement actions under the FCPA, and only 117 were brought before 2007. China has more than double the instances of bribery than any other country, and the oil and gas industry is most frequently affected by FCPA matters.
In 2007, the FBI created a special FCPA team to investigate bribery operations, penalties imposed were much higher, and agencies began prosecuting individuals in addition to companies. In 2010, the SEC created a similar special FCPA unit. The reach of the FCPA has expanded drastically over the past two decades, and companies have faced increasing compliance costs for FCPA-related matters.
The Executive Order
On February 10, 2025, President Trump signed an executive order directing the attorney general to (1) temporarily suspend new enforcement actions while maintaining oversight of existing compliance obligations, (2) review past and current enforcement actions, and (3) issue new guidance in accordance with the goals of the executive order and the Trump administration. The attorney general has 180 days to review actions and issue new guidance, and this can be extended for another 180 days if needed.
The purpose of the order is to “conduct foreign affairs and advance American economic and national security by eliminating excessive barriers to American commerce abroad” in accordance with the goals of the Trump administration. The order states that the reach of the FCPA has expanded past what is necessary, is hindering American competitiveness, and even threatens national security by preventing companies from “gaining strategic business advantages.” This order acknowledges the economic reality of conducting businesses in certain locations and unties the hands of American businessmen.
UK Antibribery Act
The UK has an antibribery law, called “the Bribery Act 2010”[2],that has much broader reach than the FCPA. The FCPA only penalizes bribes to government officials who can influence policies and law. It does not apply to the earlier example of bribing a customs clerk to get your spare parts released. It would apply, however, to paying the Minister of Agriculture for a license to buy tobacco, for example. The UK Antibribery Act also goes much further than FCPA because it prohibits commercial bribes, not just governmental.
Sections 1 to 5 of the Bribery Act 2010 cover “general bribery offences.” The crime of bribery is described in Section 1 as occurring when a person offers, gives or promises to give a “financial or other advantage” to another individual in exchange for “improperly” performing a “relevant function or activity”. Section 2 covers the offense of being bribed, which is defined as requesting, accepting or agreeing to accept such an advantage, in exchange for improperly performing such a function or activity.
Good, Bad, or Neither?
Comparing the temporary enforcement pause to a lawless frontier is an overreach, especially given that the FCPA went largely unenforced until relatively recently. While some bad actors might consider exploiting the pause to engage in illicit business practices, they would likely still be in violation of the FCPA once enforcement resumes, regardless of any relaxed guidelines. Most companies have rigid procedures in place to prevent corruption and bribes, so these programs and procedures will not quickly change, if they ever do. The executive order also explicitly grants the attorney general authority to make an “individual exception” to the enforcement pause if necessary. This is not a 180-day free pass for companies.
While the executive order temporarily affects new enforcement actions, businesses should maintain their existing FCPA compliance programs and internal controls, as the law remains in effect and enforcement could resume with potential retroactive application, although it does serve as a shift in government philosophy regarding the FCPA’s role in international business. The executive order acknowledges the economic reality of doing business in certain locations and indicates that the administration is actively seeking realistic solutions to addressing corruption in US business dealings. The key details will unfold as the attorney general releases new guidance on the future enforcement of the FCPA. While specifics are yet to be determined, companies could see a reduction in compliance costs for FCPA-related matters and new international competitiveness moving forward.
Sources
https://www.justice.gov/jm/jm-9-47000-foreign-corrupt-practices-act-1977#9-47.100
https://www.cbsnews.com/news/trump-fcpa-anti-bribery-law-executive-order
https://fcpa.stanford.edu/statistics-analytics.html?tab=9
https://www.sec.gov/about/divisions-offices/division-enforcement/enforcement-topics-initiatives/sec-enforcement-actions-fcpa-caseshttps://fcpa.stanford.edu/academic-articles/20120101-the-story-of-the-fcpa.pdf
[1] https://fcpaprofessor.com/jimmy-carter-and-the-fcpa/
[2] https://www.lawsociety.org.uk/topics/regulation/bribery-act-2010
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