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A Guide to Forensic Accounting Investigation, 2nd Edition by Jessica S. Pill, Mona M. Clayton, Thomas W. Golden, Steven L. Skalak

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Chapter 26

Foreign Corrupt Practices Act

Sulaksh Shah, Dana Weintraub, and Frederic R. Miller

One of the challenges faced by U.S. corporations doing business in emerging markets is dealing with corruption. It is not uncommon for local employees to vent to their U.S. managers about demands from government officials for inappropriate payments and about the competitive disadvantage encountered in complying with the U.S. rules in markets where competitors believe in doing things the local way.

This chapter discusses the background of the Foreign Corrupt Practices Act, recent enforcement trends, the role of the forensic accountant, lessons learned, red flags of corruption, and report writing.

BACKGROUND

The Foreign Corrupt Practices Act (FCPA) was enacted by Congress in 1977 following SEC investigations involving U.S. companies making inappropriate or illegal payments to foreign government officials to secure some type of favorable actions by foreign government officials as well as to expedite routine government duties.

The FCPA1 was enacted to proscribe bribery of foreign officials. It has three basic provisions.

Antibribery Provision

It is a crime for any U.S. person or company to directly or indirectly pay or promise anything of value to any foreign official to obtain or retain any improper advantage. With respect to the antibribery provision, it is important to note the following:

  • A U.S. person is defined to include:
    • U.S. citizens, residents, and nationals wherever located (even ...

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