The Foreign Corrupt Practices Act

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The Foreign Corrupt Practices Act, or FCPA, is an act that was put into place in 1977 to control the dealings US persons or entities would have with foreign officials. The act make it unlawful for any US party to pay, whether it is directly or indirectly, with money or anything else of value, to a foreign official in exchange for obtaining or retaining a business (FCPA Enforcement). In addition to this, any company that trades securities in the US is required to file periodic report to the Securities and Exchange Commission to have record of any business transactions in order to maintain effective internal controls (Department of Justice).

In the US, most contracts are formed privately allowing entities to control their business effectively preventing the problem the FCPA tries to resolve. No party is going to take a bribe that is not in their benefit and most of entities do not have jurisdiction over the contracts of others to be able to take any control. In many other countries, however, it is quite the opposite. It is the government that controls the contracts for major construction and manufacturing. Because of this, many entities in these countries will pay or bribe officials in order to get business contracts in their favor. Since this type of policy also applies to foreign entities doing business in these countries, many US businesses would follow this practice even though in the US this was not the norm (Miller & Hollowell, 2011, p. 22). For this reason the FCPA was created. It allowed the US to keep entities from using foreign business as a way to pay their way into beneficial contracts which they could not in the US. It also prevents foreign entities from having this advantage if doing business in the US.

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...mber 15, 2011, from FindLaw: http://library.findlaw.com/1997/Jan/1/126234.html

Miller, R. L., & Hollowell, W. E. (2011). Business Law: Text & Exercises 6th Edition. In R. L. Miller, & W. E. Hollowell, Business Law: Text & Exercises 6th Edition (pp. 22-23). Mason: South-Western Cengage Learning.

Smith, Gambrell& Russell, LLP. (n.d.). The Foreign Corrupt Practices Act. Retrieved September 15, 2011, from Smith, Gambrell& Russell, LLP: http://www.sgrlaw.com/resources/trust_the_leaders/leaders_issues/ttl15/836/

Stackhouse, D. (1993, April 21). Retrieved September 13, 2011, from IceMiller LLP: http://www.icemiller.com/publication_detail/id/45/index.aspx

Steskal, C. J. (2008, January 29). United States: The Foreign Corrupt Practices Act: The Next Corporate Scandal? Retrieved September 16, 2011, from mondaq: http://www.mondaq.com/unitedstates/article.asp?articleid=56616

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