Foreign Corrupt Practices Act

What is the Foreign Corrupt Practices Act (FCPA)?

The FCPA prohibits the offer, payment or promise of “anything of value” to a foreign official with the corrupt intent of obtaining or retaining business.  This violation is not limited only to activities overseas, but also applies to actions taken in the U.S. that would further the corruption of a foreign official. 
An FCPA violation occurs when the inducer offers or promises a payment. Whether it is paid is irrelevant.
It is the offer or promise that is considered a violation.

GETTING STARTED WITH FCPA: 3 THINGS TO UNDERSTAND 

A foreign official is very broadly defined, and NOT limited to: 

  • High level officials or ‘federal’ employees
  • Employees of government owned or controlled entities
  • Persons acting officially on behalf of a government entity
  • Political parties, party officials and candidates

Examples include:

  • Administrators and faculty of foreign state universities
  • Healthcare professionals at government-owned or controlled hospitals
  • Members of a royal family
  • Government Inspectors/Customs Agents
  • Employees of public international organizations (such as the World Bank)
  • Private persons who are “advisors” or “intermediaries”

“Anything of value” under the FCPA can fall under the category of monetary payments, preferential treatment or hospitality. 

Monetary Payments include: Cash, gift vouchers, gift cards, per diems/daily allowances and charitable donations. 

Preferential treatment can include: Contracting with an entity owned or recommended by a foreign official or their family members; Promises of internships/scholarships to Penn; Promises of admission Penn 

Hospitality within the university context can include: Travel, meals, entertainment or gifts for friends/relatives of foreign official; Training, scholarships, internships; Conference and event scholarships

To violate FCPA the payment of “anything of value” must be given with a “corrupt intent”. 


Corrupt intent is defined as when “anything of value” is given with the direct purpose of inducing the recipient to misuse his official position by doing or omitting any act that violates his or her lawful duty in order for the payee to obtain improper advantage. 


It is important to note that you are liable for a violation if a 3rd party or intermediary working on your behalf makes an improper payment with corrupt intent. This makes it very important to follow steps and understand how to mitigate the risk of using a 3rd party or intermediary. 

The FCPA is not meant to hamper international activities. The key is to understand and manage the risk that may be involved in your project. 

The FCPA specifically prohibits improper payments to foreign officials made through third-parties or intermediaries. The existence of a red flag issue does not necessarily mean that the transaction violates the FCPA but it would warrant further investigation. 

If your global activity requires a 3rd party or intermediary make yourself aware of possible red flags. 

Red flags: 

  • Recommended by a foreign official 
  • Close relationship with a foreign official 
  • Apparent lack of qualifications or resources to perform the desired task 
  • Reputation of unethical or suspicious business practices 
  • Unusually high commissions or fees 
  • Payment in cash 
  • Politically active 
  • Unwilling to enter into a written agreement or accept the University’s FCPA contract language 
  • Refuses to certify compliance with applicable anti-corruption laws 
  • Fails to create transparency in expenses and records 

Managing Risk for Activities Abroad 

  • Conduct research on the potential partners. 
  • Determine whether partner would be considered a foreign official. 
  • Understand the climate of the country you are conducting activities in. – Visit Transparency International’s Corruption Perception Index 
  • Determine whether you are providing “anything of value” to the foreign official that may be construed as having a corrupt purpose. 
  • When in doubt, contact the appropriate University personnel. 

Managing Risk for Activities at Home 

  • Determine whether you are providing “anything of value” to the foreign official that may be construed as having a corrupt purpose. 
  • Hosting a foreign official: Ensure that services provided (e.g. hotel, food) cannot be construed as aiming to gain influence. 
  • Sponsoring a conference or event scholarship: Confirm that the sponsorship is not made to a foreign official and conditioned upon receiving benefits which may be viewed as a bribe. 

Below are just a few examples of FCPA cases and the penalties enforced upon companies. 

  • Teva Pharmaceuticals – agreed to pay $519 million to settle parallel civil and criminal charges that it paid bribes to foreign government officials in Russia, Ukraine, and Mexico. (Dec. 2016) 
  • JP Morgan - agreed to pay $264 million to settle charges that it corruptly influenced government officials and won business in the Asia-Pacific region by giving jobs and internships to their relatives and friends. (Nov. 2016) 
  • GlaxoSmithKline - agreed to pay a $20 million penalty to settle charges that it violated the FCPA when its China-based subsidiaries engaged in pay-to-prescribe schemes to increase sales. (Sept. 2016) 
  • Novartis AG – agreed to pay over $25 million penalty to settle the case involing improper giffts, travel and entertainment to healthcare providers. (March 2016) 
  • PTC & Two Subsidiaries -  charged to pay more than $28 million to resolve allegations. Also, first ever deferred prosecution agreement with an individual in an FCPA case. (Feb. 2016) 
  • Bristol-Myers Squibb -  agreed to pay more than $14 million to settle charges of improper payments to obtain sales. (Oct. 2015) 
  • Avon Products Inc. –  agreed to pay $135 million to settle the SEC charges and a parallel criminal case. (Dec. 2014) 

Each employee is responsible for understanding the Code of Business Conduct and Ethics and how to identify potential risks of non-compliance. 

If you are unsure, ask. If you see something, report it. If you have questions or concerns, you have a duty to escalate the matter through proper defined channels. The resources below can provide more information on FCPA, global anti-corruption and University policies that impact compliance.  

University Policies & Procedures 

Relevant policies/procedures include but are not limited to:  

Transparency International: https://www.transparency.org/en/  

Worldwide Anti-corruption Compliance Resource 

SEC & DOJ FCPA Resource Guide: https://www.documentcloud.org/documents/515229-a-resource-guide-to-the-u-s-foreign-corrupt.html  

Test your knowledge with the scenarios below. If you have any questions about FCPA, please contact GSS.  

Professor Jones is planning a project in Ghana. She has a contact in the field who is helping her set up. Does FCPA compliance prohibit the use of 3rd Parties? 

NO. Using 3rd Parties does not mean you have violated FCPA. To engage with a 3rd Party, use the red flag list below to help you ask the right questions and assess the level of risk. 

You have been advised, through a close friend, to use a particular contact of theirs to help you with on-site support for your project abroad. Your friend trusts this contact, so it should be fine, right? 

NOT NECESSARILY. Risk mitigation is your responsibility. It is important to have steps in place to evaluate all of the parties with whom you interact. This includes making sure that this contact is not a foreign official or will not be doing things, on your behalf, that may compromise your project, you personally, or the University in any way.  Learning the steps of risk mitigation will enable you to have reasonable confidence that those with whom you collaborate are engaged in normal, legitimate transactions. 

Professor Smith has a colleague he’s known for years who works at a state university in Europe. Is this friend considered a foreign official under FCPA? 

YES. Many public or state universities abroad are government entities. Anyone who works at such schools are considered foreign officials.

A scholarship is awarded to the eldest son of a government minister from China. Is this scholarship an FCPA violation? 

POSSIBLY. If Penn does not benefit in any way from the minister’s position and the son’s admission and scholarship is inline with the normal criteria for the main population of Penn students, then this would not be considered an FCPA violation. Accurate and transparent documentation of the award criteria and selection process would be required to defend an FCPA inquiry regarding this payment. 

You are commencing a research project at a public university abroad where it is customary to bring gifts to colleagues upon arrival. Are these gifts considered an FCPA violation? 

NOT NECESSARILY. Transparency is essential to avoid a violation. Document what the gifts are, when they were purchased, their cost, and to whom they are given. Be able to demonstrate that you gain no advantage or benefit as a result of these gifts. And consult the appropriate Penn Policies before making any purchases.