Bribery, Corruption and the FCPA Books and Records Provisions
It is important to remember that in addition to the anti-bribery provisions, the Foreign Corrupt Practices Act(“FCPA”) contains accounting provisions that prohibit off-the-books accounting and require companies keep accurate books and records and to implement and maintain an adequate system of internal accounting controls.

The goal of FCPA accounting provisions is to ensure that the company’s records reflect transactions inconformity with accepted methods of recording economic events and to prevent off-the-books slush funds and payments of bribes.  The FCPA accounting provisions are instrumental, since bribes are often concealed in companies’ books and records as legitimate payments, such as consulting fees, commissions, marketing expenses, study budgets, travel expenses, rebates or discounts, or miscellaneous expenses.    

As with the anti-bribery provisions, the is no materiality threshold under the FCPA books and records provision. Enforcement scenarios cover both misreporting of significant corrupt payments or inaccurate recording of numerous smaller payments made as part of a systematic pattern of bribery. Furthermore, enforcement authorities can bring FCPA cases, based on its books and records provisions, involving other types of misconduct, such as export controls violations, financial fraud, violations of sanctions regimes, or commercial bribery.

With respect to the FCPA accounting provisions, it is important to keep in mind that a company’s books and records include those of its consolidated subsidiaries and affiliates, thus extending the responsibility of a public company to ensuring that entities under its control, including foreign subsidiaries or joint ventures, comply with the accounting provisions.  For example, a company can be liable for violating the FCPA accounting provisions, when it is a partner in a joint venture in a foreign jurisdiction and foreign employees of that joint venture engaged in paying bribes in the foreign jurisdiction to advance the business of the joint venture and mischaracterized such illicit payments as “travel expenses” or “consulting fees.” The basis for such liability would be a failure to have adequate internal controls and failure to act on red flags indicating potential engagement of affiliates in bribery schemes.    

Liability for FCPA accounting provisions violations, both for companies and individuals, can be civil and criminal.  Under the Sarbanes-Oxley act, a company’s “principal officers” (typically the CEO or CFO) take responsibility for and certify the integrity of their company’s financial reports, confirming, among other things, that the report contains no material misstatements or omissions and that internal controls are properly designed.  Thus, corporate officers can be held liable as control persons.  Additionally, individuals and entities can be held directly civilly liable for falsifying a company’s books and records or for circumventing internal controls. Officers and directors may also be held civilly liable for making false statements to a company’s auditor.  In case of knowing and willful violation of FCPA’s books and records or internal controls provisions, companies and individuals can also face criminal liability.                                           

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