FCPA – Who Is a Foreign Official?

Resource Guide to the U.S. Foreign Corrupt Practices Act - FCPA

Resource Guide to the U.S. Foreign Corrupt Practices Act – FCPA

From the Resource Guide to the U.S. Foreign Corrupt Practices Act (FCPA) (Pages 19/20):

Who Is a Foreign Official?

 

The FCPA’s anti-bribery provisions apply to corrupt payments made to:

    • (1) “any foreign official”;
    • (2) “any foreign political party or official thereof ”;
    • (3) “any candidate for foreign political office”; or
    • (4) any person, while knowing that all or a portion of the payment will be offered, given, or promised to an individual falling within one of these three categories.

Although the statute distinguishes between a “foreign official,” “foreign political party or official thereof,” and “candidate for foreign political office,” the term “foreign official” in this guide generally refers to an individual falling within any of these three categories.

The FCPA defines “foreign official” to include:

any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization

As this language makes clear, the FCPA broadly applies to corrupt payments to “any” officer or employee of a foreign government and to those acting on the foreign government’s behalf. The FCPA thus covers corrupt payments to low-ranking employees and high-level officials alike.

The FCPA prohibits payments to foreign officials, not to foreign governments. That said, companies contemplating contributions or donations to foreign governments should take steps to ensure that no monies are used for corrupt purposes, such as the personal benefit of individual foreign officials.

Department, Agency, or Instrumentality of a Foreign Government

 

Foreign officials under the FCPA include officers or employees of a department, agency, or instrumentality of a foreign government. When a foreign government is organized in a fashion similar to the U.S. system, what constitutes a government department or agency is typically clear (e.g., a ministry of energy, national security agency, or transportation authority).

However, governments can be organized in very different ways. Many operate through state-owned and state-controlled entities, particularly in such areas as aerospace and defense manufacturing, banking and finance, healthcare and life sciences, energy and extractive industries, telecommunications, and transportation. By including officers or employees of agencies and instrumentalities within the definition of “foreign official,” the FCPA accounts for this variability.

The term “instrumentality” is broad and can include state-owned or state-controlled entities. Whether a particular entity constitutes an “instrumentality” under the FCPA requires a fact-specific analysis of an entity’s ownership, control, status, and function. A number of courts have approved final jury instructions providing a non-exclusive list of factors to be considered:

    • the foreign state’s extent of ownership of the entity;
    • the foreign state’s degree of control over the entity (including whether key officers and directors of the entity are, or are appointed by, government officials);
    •  the foreign state’s characterization of the entity and its employees;
    • the circumstances surrounding the entity’s creation;
    • the purpose of the entity’s activities;
    • the entity’s obligations and privileges under the foreign state’s law;
    • the exclusive or controlling power vested in the entity to administer its designated functions;
    • the level of financial support by the foreign state (including subsidies, special tax treatment, government-mandated fees, and loans);
    • the entity’s provision of services to the jurisdiction’s residents;
    • whether the governmental end or purpose sought to be achieved is expressed in the policies of the foreign government; and
    • the general perception that the entity is performing official or governmental functions.

Companies should consider these factors when evaluating the risk of FCPA violations and designing compliance programs.

To read the Resource Guide to the U.S. Foreign Corrupt Practices Act (FCPA)

See: http://kycmap.com/fcpa-resource-guide.pdf