Ethics, Compliance and Audit Services
FCPA Information and Resources
The University of California is a global organization. The University extends its global influence and shares its contributions to the world through faculty and student exchange programs, intercollegiate consortia, sponsored research, research collaborations, work with nonprofit corporations, joint ventures, international foundations, trusts, various field work and more. University researchers often collaborate in remote countries high on Transparency International’s Corruption Perception Index and may find themselves or their associates making logistical arrangements involving local officials.
The Foreign Corrupt Practices Act (FCPA) is an American act enacted to prevent corrupt payments to foreign government officials and others considered to be “instrumentalities of a foreign government”. FCPA applies to US companies and institutions, as well as foreign companies, institutions or persons with a nexus to the United States, and their affiliates. FCPA has two components, anti-bribery provisions and maintaining accurate books, records, and internal controls so bribes cannot be hidden. Although the prohibition against corrupt payments appears simplistic and straightforward on its face, in practice, the Act and its enforcement reflect pitfalls that are far from obvious.
What the FCPA prohibits
A violation of the FCPA consists of a payment, offer, authorization, or promise to pay money or anything of value:
- to a foreign government official (including a party official or manager of a state-owned concern, or other instrumentality of a foreign government), or to any other person, knowing that the payment or promise will be passed on to a foreign official or instrumentality
- with a corrupt motive
- for the purpose of …
- influencing any act or decision of that person,
- inducing such person to do or omit any action in violation of his lawful duty,
- securing an improper advantage, or
- inducing such person to use his influence to affect an official act or decision in order to assist in obtaining or retaining business for or with, or directing any business to, any person.
Pitfalls for universities
Because the University of California is a U.S. legal institution, the FCPA applies to all personnel and operations worldwide, regardless of location or nationality. Risks associated with violation of the FCPA and other anti-bribery laws include criminal, regulatory and reputational risks. Pitfalls for the unwary include:
- The definitions of “payment” and “foreign official” are sufficiently broad to cover a wide range of benefits conferred on someone in a position to affect that person’s dealings with a foreign government or instrumentality. Non-monetary benefits, including travel and entertainment, fall within these broad definitions.
- Employees of state-owned foreign institutions and enterprises including faculty at foreign universities may be considered “foreign officials” for purposes of the FCPA.
- The statute contains no minimum monetary threshold; even the smallest benefits conferred are prohibited and a corrupt payment need not actually be paid or delivered, FCPA prohibits the offer, authorization, or promise to make a corrupt payment in addition to the actual payment.
- For global institutions such as the UC, pitfalls include liability for the acts of third parties who act on our behalf and the burden of due diligence.
- Even “charitable donations” in the foreign country “may” constitute a violation of the FCPA, if it is intended to corruptly assist the University to obtain the necessary government approvals to operate in the region.
- Significant fines and imprisonment are possible for FCPA violations.
International cooperation, global health, and overseas activities must be undertaken with an awareness of these risks. Organizations and individuals may be subject to prosecution for corrupt payments even if they have no actual knowledge that bribes or corrupt benefits are being paid. Criminal sanctions are imposed on persons who pay money to third parties with a reckless disregard for circumstances that suggest the money is being used for corrupt purposes. Thus, if a university researcher hires a local in-country advisor, consultant, or coordinator who in turn pays money to a government official in exchange for official actions that benefit the researcher, or which enable a research program to proceed, the university employee and the university may be targeted by the U.S. Department of Justice for violating the FCPA even absent actual knowledge of the corrupt payment. Additional red flags may include:
- Unusual Payment Patterns or Financial Arrangements
- A History of Corruption in the Country – ECAS can share Transparency International’s Corruption Perceptions Index
- Apparent Lack of Qualifications or Resources by Local Agents despite effectiveness
- Unusually high commissions for “getting things done”
- Lack of Transparency in Expenses and Accounting Records
- Payment of Expenses in Advance
Webinars and additional training
- FCPA: Advanced Tools and Regulatory Update
Brian Warshawsky, February 17, 2016 (slides)
- International Activities: 3rd parties and the risk of corruption
Brian Warshawsky, December 9, 2015 (slides)
- International Activities: Due Diligence and Tools
Michelle Hermas, Gary Leonard, Brian Warshawsky, December 2, 2015 (slides)
- Intro to Foreign Corrupt Practices Act (FCPA)
The Office Ethics, Compliance and Audit Services offers an interactive training and education course on the Federal Corrupt Practices Act (FCPA). This course is in response to the increase in international regulations, anti-corruption legislation, and prosecution worldwide we are seeing in international compliance. As a global university, the involvement of University of California faculty, staff, and students in international settings continues to increase. The broad scope of these actions can create hidden risks and we must remain vigilant to understand and mitigate these risks. The new Foreign Corrupt Practices Act (FCPA) and Anti-Corruption course, available through your location’s LMS Learning Management System, provides a balance of introducing this important topic and increasing understanding of the underlying issues. This visually dynamic course is filled with timely examples and illustrations relevant to the academic community and takes only about a half an hour. Faculty and staff will find the information they need to identify red flags before they become a problem. The course provides information needed for understanding before that foreign delegation arrives, before faculty and staff depart for international travel, or before work begins in international locations. To access course, please log in to your campus UC Learning Center and search ‘FCPA’