Q: What is the Foreign Corrupt Practices Act or FCPA?
A: The United States passed the law in 1977. Its objective is for the US to be able to prosecute companies and individuals subject to US law for engaging in corrupt practices such as bribery when doing business abroad.
Q: What is the goal of the FCPA?
A: The FCPA makes it unlawful for certain classes of persons and entities to
make payments to foreign government officials to assist in obtaining or retaining business abroad.
Q: Does the FCPA apply in Vietnam?
A: Yes, it does. US corporations, their subsidiaries, affiliated companies, and employees subject to US law, and operating in Vietnam can be prosecuted for acts of bribery committed in Vietnam.
Q: Which entities or individuals are subject to the FCPA?
A: It applies to: (a) United States individuals; (b) United States corporations; and (c) other
corporations and multinationals listed on the US stock exchange.
Q: Can a foreign national who is not a citizen or resident of the United States be subject to the FCPA?
A: Yes. Coupled with the United States Travel Act, 18 U.S.C §1952, anyone, including foreign nationals, who use "any facility in interstate or foreign commerce" with the intent to "distribute the proceeds of any unlawful activity" or "otherwise [to] promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on, of any unlawful activity" can be prosecuted under the FCPA.
Q: What are the elements needed to prove violations under the FCPA?
A: For an individual or a corporation to be found in violation, five elements must be proven:
(1) a payment, offer, authorization, or promise to pay money or anything of value;
(2) to a foreign government official (including a party official or manager of a state-owned concern), or to any other person, knowing that the payment or promise will be passed on to a foreign official;
(3) with a corrupt motive;
(4) for the purpose of (a) influencing any act or decision of that person, (b) inducing such person to do or omit any action in violation of his lawful duty; (c) securing an improper advantage, or (d) inducing such person to use his influence to affect an official act or decision; and
(5) in order to assist to obtain or to retain business for or with, or to direct any business to any person.
Q: What are the affirmative defenses to a charge or allegation of FCPA violation?
A: In 1988, the FCPA was amended to add two affirmative defenses: (1) the local law defense, that is, the act is permitted under local law; and (2) the reasonable and bona fide promotional expense defense.
Q: What industries in Vietnam are most susceptible to FCPA violations?
A: Although all companies in all industries operating in Vietnam and elsewhere are susceptible to FCPA violations; based on past cases the following industries are "high risk": (1) Construction; (2) Oil and Gas; (3) Pharmaceutical and Medical Device, and (4) Telecommunications.
Q: Why is the construction industry susceptible to FCPA violations?
A: Due to the involvement of government contracts, permits, a bidding process and licenses that are required from the Vietnamese government, the construction industry is susceptible to FCPA violations.
Q; Why is the Oil and Gas industry susceptible to FCPA violations?
A: Given the significant government involvement and regulatory process in the oil and gas industry, there is a higher risk for FCPA violations when US companies and entities interact with foreign government officials.
Q; Why are the pharmaceutical and medical device industries particularly susceptible to FCPA violations?
A: In Vietnam, 86% of all hospitals in Vietnam are government or publicly owned. Those hospitals have the authority to purchase pharmaceutical products and medical equipment and devices.
Q: Why is the telecommunications industry susceptible to FCPA violations?
A: The telecommunications industry requires government licenses and permits. US telecommunication firms must interact with Vietnamese government officials to operate in Vietnam.
Q: Which United States federal departments or agencies have authority under the FCPA to investigate and enforce FCPA violations?
A: The Department of Justice (DOJ) is given broad authority to investigate and enforce the FCPA. The Securities and Exchange Commission (SEC) has joint authority to investigate and enforce.
Q: What enforcement tools do the DOJ and the SEC have?
A: The FCPA has two main provisions.
The first provision, the enforcement provision, gives the DOJ and SEC the authority to: (a) investigate suspected FCPA violations by corporations and individuals: (b) initiate criminal charges against the company and responsible individuals. If convicted, the company can face significant fines; (c) require disgorgement of ill-gotten gains in which the company is required to give up the profits it obtained from FCPA violations; (d) impose enhanced penalties higher than the profits obtained from the FCPA violation.
The second provision under the FCPA is the accounting provision. It requires companies to maintain accurate books and records, and to have internal accounting controls in place. The FCPA also prohibits "off-the-books accounting" to strengthen the accuracy of the corporate books and records and the reliability of the audit process.
Q: How do suspected FCPA violations or actual FCPA violations normally come to the attention of the DOJ and the SEC?
A: Both the DOJ and the SEC have enforcement authority under the FCPA. Both the DOJ and the SEC have on their websites a system whereby employees and other individuals can anonymously report suspected FCPA violations to the DOJ and the SEC. The DOJ and the SEC also have whistleblowing programs to encourage employees and other individuals to report possible FCPA violations to the SEC and the DOJ.
Q: Once a person or a whistleblower reports a possible FCPA violation to the DOJ and/or the SEC, what happens next?
A: Both the DOJ and the SEC have the authority to investigate potential violations. To encourage self-reporting and self-investigation, both the DOJ and the SEC authorize and encourage corporations to self-investigate and self-report FCPA violations to avoid greater fines and penalties. If the company self-investigates, self-reports, and takes remedial measures to prevent future violations, the DOJ and/or the SEC can lessen the penalty, lessen the amount of mandatory disgorgement of profits, defer criminal prosecution. If the company does not engage in self-investigation or self-reporting, the DOJ and/or the SEC can impose greater fines and penalties, and in some cases file criminal charges (authority given to the DOJ) against the company and/or individuals or obtain injunctive relief to prevent future violations (authority given to the SEC).
Q: What incentives are provided by the SEC to encourage whistleblowers to report potential and actual FCPA violations?
A: The SEC has a comprehensive, well developed, and successful Whistleblower Program. It provides the whistleblower with 10%-30% of any fines collected from a company that violated the FCPA where the fines equal to or exceed $1 million US dollars.
Q: What are the factors the SEC will look at to determine whether whistleblowers will be awarded 10%-30% of any fines collected from corporations that are found to have violated the FCPA?
A: The SEC looks at the following factors: (1) original information, that is, the information cannot be found from public sources or is already known by the SEC but originated from whistleblower's independent knowledge or analysis; (2) significance of information provided; (3) actual assistance provided by the whistleblower and the whistleblower's attorney; and (4) the "programmatic interest" of the SEC to deter violations of the securities law and anti-money laundering law as they relate to the FCPA.
Q: What financial incentive is provided by the DOJ to encourage whistleblowers to report potential and actual FCPA violations?
A: In March of 2024, the DOJ announced its new program to reward whistleblowers who report corporate crimes, including violations of the FCPA. The DOJ's standards for award are more stringent than the SEC's. For a whistleblower to receive a monetary award under the DOJ new program, the whistleblower's report must: (a) be voluntary; (b) be non-public information or can be information already known to the DOJ; (c) be truthful; (d) concern "significant corporate or financial misconduct" that leads to the successful prosecution and fines equal to or which exceeds US$1 million (e) come from an by an individual who is not involved in the criminal activity or by an officer or financial officer of a public or private company or a foreign government official; (f) fully cooperate with the DOJ in its investigation of the company; and (g) where no other federal whistleblower programs, such as qui tam, exist.
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