From the information provided by the Justice Department in Opinion Releases and in enforcement actions, there are several different insights which may be drawn on what should go into your policy on facilitation payments:
- Size of payment – Is there an outer limit? No, there is no outer limit but there is some line where the perception shifts. If a facilitating payment is over $100 you are arguing from a point of weakness. The presumption of good faith is against you. You might be able to persuade the government at an amount under $100. But anything over this amount and the government may well make further inquiries. So, for instance, the DOJ might say that all facilitation payments should be accumulated together and this would be a pattern and practice of bribery.
- What is a routine governmental action? Is the company entitled to this action, has it met all of requirements to obtain the requested permit, license or action or is it asking the government official to look the other way on some requirement? Is the company asking the government official to give us a break? The key question here is whether you are entitled to the action otherwise.
- Does the seniority of the governmental official matter? This is significant because it changes the presumption of whether something is truly discretionary. The higher the level of the governmental official involved, the greater chance his decision is discretionary.
- Does the action have to be non-discretionary? Yes, because if it is discretionary, then a payment made will appear to be obtaining some advantage that is not available to others.
- What approvals should be required? A facilitation payment is something that must be done with an appropriate process. The process should have thought and the decision made by people who are the experts within the company on such matters.
- Risk of facilitation payments and third parties? Whatever policy you have, it must be carried over to third parties acting on your behalf or at your direction. If a third party cannot control this issue, the better compliance practice would be to end the business relationship.
- How should facilitation payments be recorded? Facilitation payments must be recorded accurately. You should have a category entitled “Facilitation Payments” in your company’s internal accounting system. The labeling should be quite clear and they are critical to any audit trail so recording them is quite significant.
- Monitoring programs? There must always be ongoing monitoring programs to review your company’s internal controls, policies and procedures regarding facilitation payments.
Also remember that the defense of facilitation payments is an exception to the FCPA prohibition against bribery. Any defendant which wishes to avail itself of this exception at trial would have to proffer credible evidence to support its position, but at the end of the day, it would be the trier of fact which would decide. So much like any compliance defense, the exception is only available if you use it at trial and it would be difficult to imagine that any company would want this matter to ever see the light of a courtroom.
After answering the above questions and your organization decides it desires to allow facilitation payments, you should draft a policy permits the company to make Facilitating Payments with (1) prior approval of the Compliance Department, (2) prior approval from Company management, and (3) proper financial recording. It may be difficult to distinguish a legal facilitation payment from a request that could be viewed as an illegal bribe or kickback; therefore, Facilitating Payments should be strictly controlled, and every effort should be made to eliminate or minimize such facilitating payments.
Do not forget that facilitation payments must be accurately shown on the books and records of your company. In all cases the employee who requested permission to make the facilitation payment must be responsible for obtaining all required approvals and forwarding a copy of the approvals and any other relevant supporting documentation as required, so that the it is recorded as a facilitation expense in the books and records maintained in a central file. Facilitation payments should not be recorded as consulting fees, entertainment expenses, or other types of expenses that may misrepresent the true nature of the payments.
There may be emergency situations when it will be difficult or impossible for employees to obtain approvals from immediately before having to decide whether or not to pay a facilitation payment. If the facilitation payment is made in an emergency, the employee reports the Facilitating Payment to the Compliance Department and explain the emergency as soon as practical after making the facilitation payment.
Three Key Takeaways
- What was the amount of the facilitation payment?
- Was the action truly routine?
- How high up was the government official who received the facilitation payment? Was his or her decision discretionary?
This month’s sponsor is the Doing Compliance Master Class. In 2018, I am partnering with Jonathan Marks and Marcum LLC to put on training. Look for dates of one of the top compliance related training going forward.