The Foreign Corrupt Practices Act (FCPA), enacted in 1977, grew out of the Watergate investigations, which revealed that some 400 U.S. companies had made illegal payments — totaling around $300 million — to foreign officials to gain unfair advantage. The FCPA is designed to prevent secret payments of corporate funds for purposes Congress deemed contrary to public policy, such as bribing foreign officials.

The anti-bribery provisions: who and what is covered

The FCPA prohibits offering or authorizing corrupt payments to:

  • A foreign official
  • A foreign political party or an official of that party
  • A candidate for political office in a foreign country

Key points examiners test:

  • Only payments to foreign government officials are prohibited — payments to foreign business owners or corporate officers are not covered by the FCPA.
  • A 'corrupt payment' is one intended to cause the recipient to misuse an official position to wrongfully direct business to the payer — whether or not the payment succeeds.
  • A mere offer or promise of a bribe violates the FCPA even if never completed.
  • Anything of value counts, except de minimis gifts (about $100 or less — tokens of hospitality).
  • Liability attaches if the payer knew — or should have known — the payment would be used to influence a government official.

What is NOT a corrupt payment

  • Payments to clerical or ministerial employees — e.g., paying a clerk to expedite goods through customs (facilitating payments).
  • Payments that are lawful under the written law of the foreign country.

The accounting provisions: books, records & internal controls

Beyond bribery, the FCPA reaches every American business through its accounting rules:

  • All public companies — regardless of foreign operations — must keep books, records, and accounts in reasonable detail that accurately and fairly reflect transactions and asset dispositions.
  • Companies registered under the 1934 Securities Exchange Act must maintain a system of internal accounting control giving reasonable assurance (not absolute assurance) that: transactions are executed per management's authorization; financial statements conform to GAAP; access to assets is authorized and accountability maintained; and physical assets are verified at reasonable intervals with differences investigated.

Penalties

  • Individuals: up to $100,000 fine and/or up to 5 years' imprisonment per criminal violation of the anti-bribery provisions.
  • Corporations: up to $2,000,000 fine per violation.
  • Fines imposed on individuals may not be paid directly or indirectly by the employer.

Because of the FCPA's reach, a written code of ethics and conduct is a practical necessity — communicated to employees, monitored by internal auditors, and often backed by written employee acknowledgments.

Exam tips: how CMA tests this topic

  • The favorite trick: payments to foreign BUSINESS people are NOT covered — only foreign government officials, parties, and candidates.
  • Facilitating (grease) payments to clerical staff are the classic 'which of these is permitted?' answer.
  • 'Reasonable assurance, not absolute assurance' — the same phrase as COSO; it links the two topics.
  • Fines cannot be reimbursed by the employer — a memorable exam fact.

Frequently asked questions

What does the FCPA prohibit?

Offering or authorizing corrupt payments — bribes — to foreign government officials, political parties, or candidates, to obtain or retain business.

Does the FCPA cover bribes to foreign business executives?

No — only foreign government officials, political parties/party officials, and candidates for foreign political office.

What are facilitating payments under the FCPA?

Small payments to clerical or ministerial employees to expedite routine actions (e.g., customs processing) — these are not prohibited corrupt payments.

What do the FCPA's accounting provisions require?

Accurate books and records in reasonable detail, plus a system of internal accounting control giving reasonable assurance over authorization, GAAP reporting, asset accountability, and asset verification.

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