The original version of the FCPA, enacted in 1977, contained an exception for payments made to non-US officials who performed duties that were “essentially ministerial or clerical”. In 1988 Congress responded by amending the FCPA under the Omnibus Trade and Competitiveness Act to clarify the scope of the FCPA’s prohibitions on bribery, including the scope of permitted facilitation payments. An expanded definition of “routine governmental action” was included in the final version of the bill, reflecting the intent of Congress that the exceptions apply only to the performance of duties listed in the subcategories of the statute and actions of a similar nature. Congress also meant to make clear that “ordinarily and commonly performed actions”, with respect to permits or licenses, would not include those governmental approvals involving an exercise of discretion by a government official where the actions are the functional equivalent of “obtaining or retaining business for, or with, or directing business to, any person”.

The FCPA contains an explicit exception to the bribery prohibition for any “facilitation or expediting payment to a foreign official, political party, or party official for the purpose of which is to expedite or to secure the performance of a routine governmental action by a foreign official, political party, or party official”. “Routine government action” does not include any decision by a public official to award new business or continue existing business with a particular party. The statute lists examples of what is considered a “routine governmental action” including:

  • obtaining permits, licenses, or other official documents to qualify a person to do business in a country;
  • processing government papers, such as visas or work orders;
  • providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or transit of goods across country;
  • providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products from deterioration; and
  • actions of a similar nature.

There is no monetary threshold for determining when a payment crosses the line between a facilitation payment and a bribe. The accounting provisions of the FCPA require that facilitation payments must be accurately reflected in an issuer’s books and records, even if the payment itself is permissible under the anti-bribery provisions of the law

Risks associated with relying on the “facilitation payments” exception

Facilitation payments carry legal risks even if they are permitted under the anti-bribery laws of a particular country. In the US enforcement agencies have taken a narrow view of the exception and have successfully prosecuted FCPA violations stemming from payments that could arguably be considered permissible facilitation payments. Violations of the accounting and recordkeeping provisions of the FCPA are also more likely when a company makes facilitation payments. Abroad, countries are increasingly enforcing domestic bribery laws that prohibit such payments. Companies that allow facilitation payments face a slippery slope to educate their employees on the nuances of permissible payments in order to avoid prosecution for prohibited bribes.

  1. US enforcement authorities construe the exception narrowly

Other than as discussed above, there is no definitive guidance on circumstances in which the facilitation payments exception applies. There may be less risk of enforcement by US authorities in cases involving bona fide facilitation payments that are made specifically for one of the purposes enumerated in the FCPA. However, companies still face the risk of at least facing a governmental inquiry to explain the circumstances surrounding the payments, possibly resulting in penalties based on an unanticipated restrictive interpretation of the exception. As noted by the FCPA Professor, the recent Noble Non-Prosecution Agreement noted that the payments made by Noble’s Nigerian customs’ agent Panalpina, to facilitate the importation of its rigs into Nigeria did “not constitute facilitation payments for routine governmental actions within the meaning of the FCPA”

2. Potential non-compliance with the FCPA’s accounting and record-keeping provisions

While the anti-bribery provisions of the FCPA permit facilitation payments, the accounting and recordkeeping provisions of the law nevertheless require companies making such payments to accurately record them in their books and records. Companies or individuals may be reluctant to properly record such payments, as it shows some semblance of impropriety and effectively creates a permanent record of a violation of local law. However, failure to properly record such expenditures may result in prosecution by the Securities and Exchange Commission (SEC) even if the underlying payments themselves are permissible. One example of prosecution resulting from the misreporting of seemingly permissible facilitation payments involves Triton Energy Corporation, which settled an investigation by the SEC involving multiple alleged FCPA violations, including the miss-recording of facilitation payments. An Indonesian subsidiary of the company had been making monthly payments, of approximately $1,000, to low-level employees of a state-owned oil company in order to assure the timely processing of monthly crude oil revenues. The SEC did not charge that these payments violated the anti-bribery provisions of the FCPA; however, these payments were miss-recorded in corporate books and therefore violated the FCPA’s accounting and recordkeeping provisions. Triton Energy consented to an injunction against future violations of the FCPA and was fined $300,000.

3. Increased enforcement of non-US laws that do not recognize an exception for facilitation payments

While the FCPA and certain other national anti-bribery laws contain exceptions for facilitation payments, such payments typically are considered illegal in the country in which they are made; there is not any country in which facilitation payments to public officials of that country are permitted under the written law of the recipient’s country. Accordingly, even if a particular facilitation payment qualifies for an exception of the FCPA, it, nevertheless, is likely to constitute a violation of local law – as well as under anti-bribery laws of other countries that also might apply simultaneously – and thus exposes the payer, his employer and/or related parties to prosecution in one or more jurisdictions. While enforcement to date in this area has been limited increased global attention to corruption makes future action more likely. Countries that are eager to be seen as combating corruption are prosecuting the payment of small bribes with greater frequency.

4. Corporate approaches to facilitation payments may exceed the legitimate scope and applicability of the exception

Businesses still struggle with how to address the facilitation payments exception in their compliance policy and procedures, if the subject is covered at all. Businesses should be wary of allowing employees to decide on their own whether a particular payment is permissible. Unless such payments are barred completely or each payment is subject to pre-approval (which in many cases would be unrealistic (e.g., passport control)), there is always the risk that an employee, agent or other person whose actions may be attributed to the company will make a payment in reliance on the exception when in fact the exception does not apply. In addition, the temptation to improperly record otherwise permissible facilitation payments has been discussed above.

Three Key Takeaways

  1. Many companies still struggle with facilitation payments.
  2. What are the five listed purposes for facilitation payments?
  3. The facilitation payment exception is narrowly construed by both the courts and the Justice Department.


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.

The FCPA states, “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.”

Government policies affect the commercial environment.  A company is subject to legislation and regulation that affects how it conducts its business and generates value for its investors.  Participating in the political process is part of a business strategy to protect a company’s interests.

Most international businesses have strategy to engage in the political process with a view to the long-term interests of the company and to promote and protect its interests. All political contributions and expenditures on behalf of the Company and management reports on these political contributions and expenditures should be reported to the Board of Directors annually.  No political contributions may be made or promised unless written pre-approval has been obtained from the corporate compliance function.

Among the factors that influence which candidates merit political donations include:

  • Candidate support for key company business and public policy priorities;
  • Candidate voting record and leadership position;
  • Candidate commitment to company’s industry growth, and ability to positively impact its goals; and
  • Company assets or employees in a region or state represented by the candidate.

All political contributions should be made in accordance with all applicable laws and regulations and disclosed as required by law. Any requests for contributions to a political candidate, committee, or party must be addressed to the corporate compliance function and must include an analysis of the four factors above, as well as business justification for the request to support the particular candidate, committee, or party.

Additionally, no Company funds or other assets may be used for political contributions outside the U.S., unless expressly approved in writing by Government Affairs.  A Company employee seeking approval for political contributions outside the U.S. must present Government Affairs, in writing, with all relevant information to allow for a thorough and careful analysis.  Among the information required by compliance function should be:

  • The name of the candidate, committee, or political party;
  • The government agency(ies) with which the candidate is or has been affiliated (e.g., has the candidate served with the Ministry of Interior and in what period of time);
  • The candidate’s position on key issues that affect Company’s business (e.g., human rights, equality, labor laws, unionization, taxes, foreign investment, etc.);
  • The candidate’s voting record on the issues affecting the Company;
  • Whether Company does business with the government entity with which the candidate is seeking a position and the amount of such business in the preceding 24 months;
  • Any pending or recently awarded contracts with the government entity with which the candidate is affiliated or is seeking a position;
  • Any pending or recently awarded contracts overseen or managed by the committee, party, or political entity for which the political contribution is sought; and
  • The business justification for making the political contribution.

Your company policy should prohibit politically exposed persons (PEPs) from exerting pressure or undue influence over you employees, agents, consultants, or representatives to make personal political contributions.

Your policy should prohibit use of your company’s resources or assets, including work time, to support candidates or campaigns personally. In the course of employment, PEPs should be prohibited from engaging in any activity on a company’s behalf that is intended to influence legislation, rulemaking, or governmental policy or engage lobbyists or others to do so, without pre-authorization of the corporate compliance function.

Political contributions shall not be used to disguise a payment that is prohibited by a company’s Code of Conduct, Anti-Corruption Policy, or other policies or procedures.  If your company’s policies prohibit the payment in another form, it should not be made under the guise of a political contribution.  No employee should utilize third parties or their own personal funds to make a payment that cannot be made under a company’s policies and procedures.

Any exceptions to this policy should only be approved by the CCO, Compliance Oversight Committee or Board of Directors.

Three Key Takeaways

  1. Political candidates are covered by the FCPA.
  2. What is the business purpose for the contribution?
  3. Do not make contributions towards candidates who can award your company business.


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.

What should your compliance policy and procedures on charitable donations look like? What should you prohibit or even caution against? The starting point is the 2012 FCPA Guidance regarding charitable donations. Your policy should begin by asking the following five initial questions:

  • What is the purpose of the donation?
  • Is the payment consistent with the company’s internal guidelines on charitable giving?
  • Is the payment at the request of a foreign official?
  • Is a foreign official associated with the charity and, if so, can the foreign official make decisions regarding your business in that country?
  • Is the payment conditioned upon receiving business or other benefits?

There are additional inquiries based upon the DOJ Opinion Releases issued regarding charitable donations. Some of the protections a company can do to comply with the FCPA regarding charitable donations are as follows:

  • Will the donation recipients certified that they or the entity will comply with the requirements of the FCPA;
  • Will the recipient provide audited financial statements; and
  • Will the recipient restrict the use of the donated funds to humanitarian or charitable purposes only;
  • Will the funds be transferred to a valid bank account; and
  • Will the recipients, allow ongoing auditing and monitoring of the efficacy of the charitable donation program.

Based upon the Schering-Plough and Lilly SEC enforcement actions, there are some additional inquiries that should be specified:

  1. What was the timing of the charitable donation or promise to make a donation in relation to the obtaining or retaining of business?
  2. Did the company follow its normal protocol for requesting, reviewing and making a charitable donation or is there a pattern of unusual donations outside the protocol?
  3. Did any one person make multiple donations just below their authority level so that it did not have to go up the line for review?
  4. Was the total amount donated to one charitable foundation out of proportion to the rest of the country or region’s charitable donation budget?
  5. Did the sales in one area, region or country spike after a pattern of charitable donations?

The information on the red flags from the prior Opinion Releases and the best practices, as set out in the 2012 FCPA Guidance, have been available for some time. From the Schering-Plough and Lilly enforcement actions, your policy should consdier the timing of charitable donations to see if they are at or near the time of the awarding of new or continued business. Finally in managing the relationship, you now need to look at overall increases in sales to determine if they are tied to a pattern of charitable donations. By looking at the timing and quantum of charitable donations, internal audit may be able to ascertain that a spike in sales is tied to corrupt conduct.

Three Key Takeaways

  1. What are the basic inquiries to make around charitable donations?
  2. Use all of the communication tools the DOJ has provided; written guidance, enforcement actions and Opinion Releases to inform your charitable donation policy.
  3. Document Document Documents the basis of your charitable donations risk assessment.


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.

Opinion Releases can provide valuable information for the compliance practitioner. I agree with the statement found in the 2012 FCPA Guidance that “DOJ’s opinion procedure is a valuable mechanism for companies and individuals to determine whether proposed conduct would be prosecuted by DOJ under the FCPA. Generally speaking, under the opinion procedure process, parties submit information to DOJ, after which DOJ issues an opinion about whether the proposed conduct falls within its enforcement policy.”

In the areas of charitable donations, the DOJ has provided several Opinion Releases which give solid guidance on this tricky issue. There have been four Opinion Releases in the area of charitable donations under the FCPA. In each Opinion Release, the DOJ indicated that it would not initiate prosecutions based upon the fact scenarios presented to it.


This request was from a US based energy company that planned to operate a plant in

South Asia, in an area where was no medical facilities available. The energy company planned to donate $10 million for equipment and other costs to a medical complex that was under construction nearby. The donation would be made through a US charitable organization and a South Asian LLC.

The energy company stated it would do three things with respect to this donation.

  1. Before releasing funds, the energy company said it would require certifications from the officers of all entities involved that none of the funds would be used in violation of the FCPA.
  2. It would ensure that none of the persons employed by the charity or the LLC were affiliated with the foreign government.
  3. The energy company would require audited financial reports detailing the disposition of the funds.


This request was from a US based utility company that planned to operate a plant in

Asia, in an area where there was no primary-level school. The utility company planned to donate $100,000 for construction and other costs to a government entity that proposed to build an elementary school nearby. Before releasing funds, the utility company said it would require certain guarantees from the government entity regarding the project, including that the funds would be used exclusively for the school.


This request was from a Delaware company doing business in Africa. The company desired to initiate a pilot project under which it would contribute $25,000 to the Ministry of Finance in the country to improve local enforcement of anti-counterfeiting laws. The contribution would fund incentive awards to local customs officials, which was needed because this African country was a major transit point for illicit trade and the local customs officials have no incentive to prevent the contraband.

The company said that along with the contribution, it would execute an agreement with the Ministry to encourage exchange of information and establish procedures and criteria for incentive awards. The company said that if the program is successful, the awards would continue to be funded as needed, and the company will seek the participation of its competitors in this program.

The company would implement at least five safeguards to ensure the funds would be used as intended, including:

  1. Payments to a valid government account, subject to internal audits.
  2. Payments only upon the confirmation that goods seized were in fact counterfeit.
  3. The Ministry would identify award candidates without input from the company and would provide evidence that funds were used properly.
  4. The company would monitor the program’s effectiveness.
  5. Records will be required to be kept and be available for inspection for a period of time.


A US Company desired to move from a charitable entity model to a for profit model in the area of micro-financing. To do so it was required to make a large cash donation to a charity in the country in question. The company engaged in three rounds of due diligence in which it determined that the most favorable candidate had a government official on its Board of Directors but that under the laws of the country in question, the government official could not receive compensation to sit as a Board member. After initially listing the 3 levels of due diligence in which the company had engaged prior to finalizing its choice of local entity to receive the donation; the DOJ noted that the donation ‘requested’ of the US Company would be subject to the following controls:

  1. Payments of the donations would be staggered over a period of eight quarters rather than in one lump sum.
  2. Ongoing monitoring and auditing of the funds use for a period of five years.
  3. The donations would be specifically utilized for the building of infrastructure.
  4. The funds could not be transferred to either the charities parent or any other affiliated entity.
  5. The funds would not be paid to the parent of the organization receiving the grant and there was an absolute prohibition on compensating Board Members.
  6. The proposed grant agreement under which the funds would be donated had significant anti-corruption provisions which included a requirement that the local organization receiving the funds adopt an anti-corruption policy and that company making the donation shall receive full access to the local organization’s books and records.
  7. Right to terminate the agreement and recall the funds if evidence was found that “reasonably suggests” a breach of compliance provisions.

Mendelsohn Guidance

Dick Cassin, writing in the FCPA Blog, in a posting entitled “When is Charity a Bribe?”, cited to the then Deputy Chief of the Criminal Division’s Fraud Section at the DOJ Mark Mendelsohn.  Mendelsohn was asked about the guidelines regarding requests for charitable giving and the FCPA and said that any such request must be evaluated on its own merits. He advocated a “common sense” approach in identifying and clearing Red Flags. Some of the areas of inquiry would include answers to the following questions.

  1. Is there a nexus between the charity and any government entity from which the company is seeking a decision?
  2. If the governmental decision-maker holds a position at the charity, that’s a red flag.
  3. Is the donation consistent with the company’s overall pattern of charitable donations?
  4. If one donation or a series of them is more than the company has made to any other charity in the past five years, that would also be a red flag.
  5. Who made the request for the donation and how was that request made?

Three Key Takeaways

  1. You can utilize the Opinion Release process for a wide variety of issue.
  2. You must manage your charitable donations program even after the money has been donated.
  3. Never forget the Mendelsohn common sense approach to charitable donations.


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.

Opinion Releases

Prior to the 2012 FCPA Guidance, the Justice Department issued two 2007 Opinion Releases which offered guidance to companies considering whether to, and if so how to, incur travel and lodging expenses for government officials. Both Opinion Releases laid out the specific representations made to the DOJ, which led to the Department to approve the travel to the US by the foreign governmental officials. These facts provided strong guidance to any company which seeks to bring such governmental officials to the US for a legitimate business purpose. In Opinion Release 07-01, the Company was desired to cover the domestic expenses for a trip to the US for a six-person delegation of the government of an Asian country for an educational and promotional tour of one of the requestor’s US operations sites. In Opinion Release 07-01 the representations made to the DOJ were as follows:

  • A legal opinion from an established US law firm, with offices in the foreign country, stating that the payment of expenses by the US Company for the travel of the foreign governmental representatives did not violate the laws of the country involved;
  • The US Company did not select the foreign governmental officials who would come to the US for the training program;
  • The delegates who came to the US did not have direct authority over the decisions relating to the US Company’s products or services;
  • The US Company would not pay the expenses of anyone other than the selected official;
  • The officials would not receive any entertainment, other than room and board from the US Company;
  • All expenses incurred by the US Company would be accurately reflected in this Company’s books and records.

The response from the DOJ stated: “Based upon all of the facts and circumstances, as represented by the requestor, the Department does not presently intend to take any enforcement action with respect to the proposal described in this request. This is because, based on the requestor’s representations, consistent with the FCPA’s promotional expenses affirmative defense, the expenses contemplated are reasonable under the circumstances and directly relate to “the promotion, demonstration, or explanation of [the requestor’s] products or services.”

In Opinion Release 07-02 the Company desired to pay certain domestic expenses for a trip within the US by approximately six junior to mid-level officials of a foreign government for an educational program at the Requestor’s US headquarters prior to the delegates attendance at an annual six-week long internship program for foreign insurance regulators sponsored by the National Association of Insurance Commissioners (NAIC).

In Opinion Release 07-02 the representations made to the DOJ were as follows:

  • The US Company would not pay the travel expenses or fees for participation in the NAIC program.
  • The US Company had no “non-routine” business in front of the foreign governmental agency.
  • The routine business it did have before the foreign governmental agency was guided by administrative rules with identified standards.
  • The US Company would not select the delegates for the training program.
  • The US Company would only host the delegates and not their families.
  • The US Company would pay all costs incurred directly to the US service providers and only a modest daily minimum to the foreign governmental officials based upon a properly presented receipt.
  • Any souvenirs presented would be of modest value, with the US Company’s logo.
  • There would be one four-hour sightseeing trip in the city where the US Company is located.
  • The total expenses of the trip are reasonable for such a trip and the training which would be provided at the home offices of the US Company.

As with Opinion Release 07-01, the DOJ ended this Opinion Release by stating, “Based upon all of the facts and circumstances, as represented by the Requestor, the Department does not presently intend to take any enforcement action with respect to the planned educational program and proposed payments described in this request. This is because, based on the Requestor’s representations, consistent with the FCPA’s  promotional expenses affirmative defense, the expenses contemplated are reasonable under the circumstances and directly relate to “the promotion, demonstration, or explanation of [the Requestor’s] products or services.”

Travel and Lodging for Governmental Officials

What can one glean from these two 2007 Opinion Releases? Based upon them, a US company can bring foreign officials into the US for legitimate business purposes. A key component is that the guidelines are clearly articulated in a compliance policy. Based upon Releases Opinions 07-01 and 07-02, the following should be incorporated into a compliance policy regarding travel and lodging:

  • Any reimbursement for air fare will be for economy class.
  • Do not select the particular officials who will travel. That decision will be made solely by the foreign government.
  • Only host the designated officials and not their spouses or family members.
  • Pay all costs directly to the service providers; in the event that an expense requires reimbursement, you may do so, up to a modest daily minimum (e.g., $35), upon presentation of a written receipt.
  • Any souvenirs you provide the visiting officials should reflect the business and/or logo and would be of nominal value, e.g., shirts or tote bags.
  • Apart from the expenses identified above, do not compensate the foreign government or the officials for their visit, do not fund, organize, or host any other entertainment, side trips, or leisure activities for the officials, or provide the officials with any stipend or spending money.
  • The training costs and expenses will be only those necessary and reasonable to educate the visiting officials about the operation of your company.

Incorporation of these concepts into a compliance program is a good first step towards preventing any FCPA violations from arising, but it must be emphasized that they are only a first step. These guidelines must be coupled with active training of all personnel, not only on the compliance policy, but also on the corporate and individual consequences that may arise if the FCPA is violated regarding gifts and entertainment. Lastly, it is imperative that all such gifts and entertainment are properly recorded, as required by the books and records component of the FCPA.

The 2012 FCPA Guidance does specify some types of examples of improper travel and entertainment

  • $12,000 birthday trip for a government decision maker from Mexico that included visits to wineries and dinners;

$10,000 spent on dinners, drinks, and entertainment for a government official;

  • A trip to Italy for eight Iraqi government officials that consisted primarily of sightseeing and included $1,000 in “pocket money” for each official;
  • A trip to Paris for a government official and his wife that consisted primarily of touring activities via a chauffeur-driven vehicle.

However, you can use the matter as a good reason to review not only your company’s procedures but to test to determine if they are being followed or if there are issues which you might need to take a closer look at. When a Wal-Mart, News Corp or GSK is in the news for alleged FCPA violations, it provides you a good reminder to review your compliance program.

Three Key Takeaways

  1. Gifts and business entertainment continue to plague companies for compliance violations.
  2. The key is not the amount but of having a policy and procedure and following it.
  3. Always remember to record gifts and business entertainment expenses correctly.


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.