The U.S. Department of Justice (DOJ) has released guidance on the Foreign Corrupt Practices Act (FCPA) and how the agency enforces the law. The 120-page report [1], A Resource Guide to the U.S. Foreign Corrupt Practices Act, provides basic information on the law as well as a more advanced analysis of certain provisions, such as what constitutes a foreign official under the law and how the DOJ assesses corporate compliance programs.

The definition of a “foreign official” is one of the controversial issues clarified by the guide. The guide states that the FCPA “applies to any officer or employee of a foreign government and to those acting on the foreign government’s behalf.” This means that the law applies to any rank of employee or official [2] so long as they are acting on behalf of a foreign government.

Similarly, the guide discusses the concept of “instrumentality.” This comes into play when governments operate through state-owned or state-controlled entities.

This issue is of particular interest to companies because the definition of instrumentality has been murky. The guide notes that the DOJ uses an analysis of “ownership, control, status, and function” to determine whether an entity is an instrumentality of a foreign government. According to the guide, an entity is unlikely to qualify as an instrumentality unless a government owns or controls a majority of its shares. However, an entity may qualify as an instrumentality absent a controlling stake by a government, if that government has other means of control.

For example, in one case, a government owned a 43 percent share in a telecommunications company, but was considered a “special shareholder,” and had veto power over all major purchases as well as controlling operational decisions. In this case, the telecommunications company would be considered an instrumentality of a foreign government [3].

A section of the guide that focuses on gifts is also of interest because it clarifies when gifts to government officials are considered bribery. The guide states that to be considered bribery, gifts must be given with corrupt intent—to improperly influence the official.

The guide also makes it clear that a comprehensive compliance effort can influence whether the DOJ seeks to bring charges in a corruption case and what types of charges will be brought. The DOJ recognizes that even a solid compliance program may not prevent every act of corruption. The guide states that the DOJ “may decline to pursue charges against a company based on the company’s effective compliance program, or may otherwise seek to reward a company for its program, even when that program did not prevent the underlying FCPA violation that gave rise to the investigation.”

The guide does not outline requirements for an effective compliance program. Rather, according to the guide, “they employ a common sense and pragmatic approach to evaluating compliance programs.” The DOJ, says the report, will ask three questions: Is the program well designed? Is it applied in good faith? Does it work?

In a speech [4] before the American Conference Institute’s 28th National Conference on the Foreign Corrupt Practices Act, Assistant Attorney General Lanny Breuer emphasized the importance his agency places on the FCPA and noted that enhanced enforcement efforts of the past few years will continue:

“As a result of our efforts over the past three-and-a-half years, robust FCPA enforcement has become part of the fabric of the Justice Department. Our global anticorruption mission has seeped into the Criminal Division’s core. And there is no turning back. The FCPA is now a reality that companies know they must live with and adjust to; and this nation is better off for it.”

photo by @jbtaylor/flickr [5]
 

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