Foreign Corrupt Practice Act of 1977

Foreign Corrupt Practice Act of 1977

History and Rationale of the Act

During the decade of the 1970s, there surfaced a series of scandals that came to be known as Watergate. Such was the magnitude of these scandals that they consumed President Nixon's government and were the subject of mass public attention. Corruptions and misdeeds committed during President Nixon's reign led to investigations. These investigations, in addition to individuals, were also spread to American corporations as well. The organizations that were questioned had links with the United States administration. During the process, investigators came to know of the concealed slush funds and heavy payments made by more than 400 American organizations to foreign contractors and officials in order to gain contract abroad. Upon hearing the case, the Congress ruled to pass the Foreign Corruption Practice Act in 1977. The Act then went through a number of amendments in 1988 and 1998, in order to align the bill with the technological advancements taking place.

Another reason behind the implementation of the Act was that bribery was considered to be an economic misconduct. Bribery is known as a concealed cost of conducting business, awarding business to corporation for reasons other than economic. This Act required companies in America to conduct business in a fair and equitable manner (Fox, 2012).

The FCPA signifies the Congress' decision to allow business in foreign markets to be conducted on merit (such as price, product, and quality) and should keep alliances or favors of all forms. Alliance could be political in nature due to which the bill restricted payment to governmental official to acquire tenders. Before the implementation of the FCPA, American corporation engaged in bribery could only be prosecuted through indirect methods. The Securities and Exchange Commission or SEC was of the view that American corporations were liable to make public all such payment according to the legislation. Additionally, prosecution could had the right to cite the Bank Secrecy Act which requires organizations to reveal all funds that were transferred in and out of the United States. The Fraud Mail Act was also applicable to organizations that regulated the use of electronic or United States mail communication to carry out an illegal commercial operation such as bribery. The idea behind FCPA was to develop an effective and direct means of compliance (Levenson et al, 1997).

General Scope of FCPA

There are two major approaches that the FCPA implements;

Disclosure

Prohibition

The approach of disclosure comprises of the first part of the FCPA and holds records, account and provision information. It also states that an organization must maintain accurate records of all the transactions that they engage in. The second section, prohibition, prevents American organizations from bribing European Union business officials. The Act strictly prohibits American organizations and their representative from using mail and any other medium of international commerce to hand out bribes to officials or politicians. It also prohibits the use of influence and power to obtain business (Levenson et al, ...