Foreign Corrupt Practices Act (FCPA): Enforcement & Penalties

By Julie S. Mendel, SILA-A, CDEi
Nov 19, 2020
foreign corrupt practices act: enforcement and penalties

The Foreign Corrupt Practices Act (FCPA) was enacted in 1977 after revelations of widespread bribery of foreign public officials by U.S. companies. The purpose of the FCPA was to remedy the problem and create a level playing field for American businesses by ending the corruption and restoring public confidence in the integrity of the marketplace.

When the bill was passed, Congress noted in its report that the law was specifically “designed to prohibit the corrupt use of the mails or other means and instrumentalities of interstate commerce by U.S. corporations, directly or indirectly, to bribe foreign officials, foreign political parties, or candidates for foreign political office.”

This article is Part 3 in a series on the Foreign Corrupt Practices Act and discusses the law’s enforcement agencies and penalties. To learn more about the background and history of the Foreign Corrupt Practices Act, see Part 1 of our FCPA series. To learn details about the law’s provisions, see Part 2. For a summary of FCPA cases settled with the SEC, see Part 4.

Foreign Corrupt Practices Act (FCPA) Enforcement

Enforcement of the Foreign Corrupt Practices Act falls under the joint jurisdiction of the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ). The SEC is granted investigative jurisdiction under the FCPA, and the SEC can then refer cases it investigates to the DOJ for criminal prosecution.

When the FCPA was passed in 1977, Congress explained its reasoning for granting investigative authority under the law to the SEC:

The committee recognized the SEC’s singular expertise at ferreting out foreign bribery. It was the [SEC] alone that followed up on the finding of the Watergate Special Prosecution Force in early 1975. On the other hand, it was not until late 1976 that the Justice Department formed a task force to investigate allegations of foreign corporate payments and to review all materials relating to such activities generated by the SEC and congressional committees.

A further reason for vesting investigative jurisdiction in the SEC with respect to section 2 arises from the [SEC’s] well-deserved reputation for independence in its efforts. The committee would prefer to have investigations such as these, which may be politically sensitive, conducted by an independent agency responsive to Congress rather than the Executive branch. H.R. Rep. No. 95-640 [1977]

In 2010, the SEC created a specialized Foreign Corrupt Practices unit to further enhance its enforcement of the FCPA.

Although only the DOJ has the authority to pursue any criminal actions, both the DOJ and SEC share civil enforcement authority under the FCPA. The DOJ has authority to pursue civil actions for anti-bribery violations by domestic concerns (and their officers, directors, employees, agents, or stockholders) and foreign nationals and companies for violations while in the United States, while the SEC may pursue civil actions against issuers and their officers, directors, employees, agents, or stockholders for violations of the anti-bribery and the accounting provisions.

Foreign Corrupt Practices Act (FCPA) Penalties

Sanctions for FCPA violations are often substantial, and for individuals, criminal violations may result in imprisonment and/or significant fines, which are provided in more detail below. The FCPA also specifically prohibits fines incurred by individuals from being paid by companies, whether directly or indirectly. Both companies and individuals that have committed either civil or criminal FCPA violations may be required to pay back any profits obtained as a result of the bribe or corrupt payment. These can be done through disgorgement or restitution plus prejudgment interest, or paying substantial criminal fines or civil penalties, as well as being subject to oversight by an independent compliance monitor.

Criminal Penalties

For criminal violations, the FCPA provides significant penalties. For each violation of the law’s anti-bribery provisions, these penalties may include:

  • Up to $2 million fine for corporations and other business entities
  • Up to $250,000 fine and imprisonment up to five years for individuals

For each violation of the law’s accounting provisions, penalties may include:

  • Up to $25 million fine for corporations and other business entities
  • Up to $5 million fine and imprisonment up to 20 years for individuals

The Alternative Fines Act also allows courts to impose significantly higher fines than those specifically provided by the FCPA listed above. These fines can be up to twice the benefit obtained by the defendant as a result of the corrupt payment. Criminal violations may also result in a company being subject to suspension and debarment actions that limit any business opportunities with the U.S. government.

Civil Penalties

Civil penalties for FCPA violations are often still considerable. For violations of the law’s anti-bribery provisions, civil penalties may include:

  • Up to $21,410 fine per violation for corporations and other business entities
  • Up to $21,410 per violation for individuals

For violating the FCPA’s accounting provision, the SEC may impose a civil penalty not to exceed the greater of (a) the gross amount of the pecuniary gain to the defendant as a result of the violations, or (b) a specified dollar limitation. The specified dollar limitations are determined by the egregiousness of the violation and can range from $9,639 to $192,768 for an individual and $96,384 to $963,837 for a company.

Foreign Corrupt Practices Act (FCPA) Statute of Limitations

The Foreign Corrupt Practices Act does not specify a statute of limitations for criminal actions in either its anti-bribery or accounting provisions. For the FCPA’s anti-bribery provisions, the general five-year statute of limitations specified in the U.S. criminal code applies to any substantive criminal violations:

Except as otherwise expressly provided by law, no person shall be prosecuted, tried, or punished for any offense, not capital, unless the indictment is found or the information is instituted within five years next after such offense shall have been committed. 18 U.S.C. § 3282(a)

For violations of the FCPA’s accounting provisions, which are now defined as “securities fraud offense[s]” under 18 U.S.C. § 3301, the statute of limitations is six years.

However, the SEC and DOJ have stated that there are at least two ways in which the statute of limitations period is commonly extended:

  1. Companies or individuals cooperating with the DOJ may enter into a tolling agreement that voluntarily extends the limitations period.
  2. Under 18 U.S.C. § 3292, the statute of limitations may be suspended for up to three years in order for the government to obtain evidence from foreign countries.

For civil cases brought by the SEC for FCPA violations, the statute of limitations is set by 28 U.S.C. § 2462, which provides for a five-year limitation on any “suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture.” The five-year period begins to run “when the claim first accrues.” However, this statute does not prevent the SEC from seeking equitable remedies, such as an injunction or the disgorgement of ill-gotten gains, for conduct pre-dating the five-year period.

In cases where the individual is not a resident of the United States, the statute is tolled for any period when the defendants are not “found within the United States in order that proper service may be made thereon.”

Full Foreign Corrupt Practices Act (FCPA) Series

This article is Part 3 in a four-part series on the Foreign Corrupt Practices Act of 1977 (FCPA). For more information about the FCPA, see the full series:

Foreign Corrupt Practices Act (FCPA) Courses & Training

To learn more about compliance with the Foreign Corrupt Practices Act, WebCE offers the course Foreign Corrupt Practices Act: Avoiding Improper Payments, which is approved as continuing education (CE) credit for FINRA as well as CFP® certificants. To order this course and more, visit WebCE’s Firm Element course catalog by clicking the button below!

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