"Foreign Corruption Practices Act" (FCPA) and Its Implications for Companies Operating in China
This report focuses on the Foreign Corruption Practices Act (FCPA), an act passed by the US Congress in 1977, which prohibits payments to foreign officials with the intent to influence business decisions or maintain business relationships. The report emphasizes the importance of companies operating in China being aware of their responsibilities under the FCPA, as non-compliance can lead to severe penalties including fines and imprisonment.
The FCPA applies to US-listed companies, requiring them to adhere to bookkeeping rules that align with anti-bribery regulations, ensuring accurate and fair representation of transactions. Companies must also establish and maintain appropriate internal control systems. While the general requirements of the FCPA are straightforward, the common customs and business practices in China make compliance with the FCPA complex and challenging.
Companies operating in China face uncertain economic conditions, particularly regarding the FCPA, but investing in China often outweighs the risks of potential FCPA violations due to its growing role in global markets. With an average annual GDP growth rate of 9% over the last 26 years and increasingly attractive conditions for foreign direct investment, ignoring China's investment opportunities becomes costly.
The FCPA comprises three main parts: actions by individuals or entities covered by the act, offering money or gifts, influencing government officials, especially those with a corrupt background, to maintain or gain business, and receiving new orders. The FCPA distinguishes between 'issuers' (US-listed companies regulated by the Securities and Exchange Commission) and 'domestic concerns' (non-registered entities). The Department of Justice is responsible for enforcing the FCPA against domestic concerns.
The report concludes that understanding the risks associated with business activities in China is crucial for companies subject to the FCPA. Compliance with the FCPA requires careful planning and management, considering the complexity and nuances of Chinese business practices.
