FCPA and UK Bribery Act Elements

Why This Topic Matters
The Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act 2010 are the two most influential anti-corruption statutes in the world, and the ACFE tests them heavily in the Law section of the CFE Exam. Fraud examiners are routinely asked to assess whether a payment to a government official, an agent, or a business partner creates legal exposure. Because both laws reach far beyond their home countries, a company operating almost anywhere can be prosecuted under one or both. On the exam, you must be able to break each statute into its elements, recognise the exceptions and defences, and spot the critical differences between the two laws. Questions on this topic are frequently written as scenarios, so a clear understanding of each element is essential.

Part 1: The U.S. Foreign Corrupt Practices Act (FCPA)

Background
Enacted in 1977 after SEC investigations revealed widespread questionable payments by U.S. companies to foreign officials. Amended in 1988 (added the facilitating payment exception and affirmative defences) and again in 1998 (expanded jurisdiction to foreign persons acting in U.S. territory, implementing the OECD Anti-Bribery Convention). The FCPA has two distinct sets of provisions:
1. Anti-bribery provisions (enforced criminally by the Department of Justice and civilly by the SEC).
2. Accounting provisions (books and records plus internal controls, enforced by the SEC and, for willful violations, the DOJ).

Who Is Covered by the Anti-Bribery Provisions?
- Issuers: any company (U.S. or foreign) with securities registered in the U.S. or required to file reports with the SEC, including foreign companies with American Depositary Receipts.
- Domestic concerns: U.S. citizens, nationals, and residents, and any business entity organised under U.S. law or with its principal place of business in the U.S.
- Any person acting within U.S. territory: foreign nationals or companies that take any act in furtherance of a corrupt payment while in the U.S.
- Officers, directors, employees, agents, and stockholders acting on behalf of any of the above.

The Elements of an FCPA Anti-Bribery Violation
The ACFE breaks the offence into these elements. A prosecutor must prove each one:
1. A covered person (issuer, domestic concern, or person acting in U.S. territory).
2. Made use of the mails or any means or instrumentality of interstate commerce (telephone, email, wire transfer, travel). For U.S. persons, acts entirely outside the U.S. are also covered under nationality jurisdiction.
3. Corruptly: with an intent or desire to wrongfully influence the recipient. The payment does not need to succeed; the offer alone is enough.
4. Offered, paid, promised to pay, or authorised the payment of money or anything of value. Anything of value is interpreted broadly: cash, gifts, travel, entertainment, charitable donations, employment for relatives, scholarships, discounts.
5. To a foreign official, a foreign political party or party official, a candidate for foreign political office, or any person while knowing that all or part of the payment will be passed on to one of those recipients (third-party liability).
6. For the purpose of influencing an official act or decision, inducing the official to do or omit to do an act in violation of lawful duty, securing any improper advantage, or inducing the official to use influence with a foreign government.
7. In order to assist in obtaining or retaining business for or with, or directing business to, any person (the business purpose test). Courts interpret this broadly; reducing customs duties or taxes can satisfy it.

Key Definitions You Must Know
- Foreign official: any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organisation (e.g., the UN, World Bank), or any person acting in an official capacity for them. Employees of state-owned or state-controlled enterprises (such as a national oil company or state hospital) are foreign officials. Rank does not matter.
- Knowing: a person knows a payment will be passed on if they are aware of it, have a firm belief it will happen, or are aware of a high probability that it will happen. Conscious disregard, willful blindness, and deliberate ignorance satisfy the knowledge standard. You cannot avoid liability by telling an agent 'do not tell me how you get the contract.'
- The FCPA does not cover bribes to purely private-sector individuals and does not directly criminalise the official who receives the bribe (recipients may be charged under other laws, such as money laundering).

The Exception: Facilitating (Grease) Payments
Payments made to expedite or secure the performance of a routine governmental action are excepted. Routine governmental action is a non-discretionary act ordinarily and commonly performed by an official, such as:
- Obtaining permits, licences, or other official documents to do business.
- Processing visas and work orders.
- Providing police protection, mail pick-up and delivery, or scheduling inspections.
- Providing phone service, power, water, loading and unloading cargo, protecting perishable goods.
Routine governmental action does not include any decision to award new business, continue business, or the terms of business. The exception is narrow, must still be accurately recorded in the books, and is not recognised under the UK Bribery Act or most other national laws.

The Two Affirmative Defences
(The defendant bears the burden of proving these.)
1. Local law defence: the payment was lawful under the written laws and regulations of the foreign country. Custom, tolerance, or the fact that 'everybody does it' is not a defence.
2. Reasonable and bona fide expenditure defence: the payment was a reasonable, bona fide expense (such as travel and lodging) directly related to the promotion, demonstration, or explanation of products or services, or to the execution or performance of a contract with a foreign government or agency.

The FCPA Accounting Provisions
These apply only to issuers (not to domestic concerns that are not SEC registrants) and were designed to prevent companies from hiding bribes as 'consulting fees' or 'commissions.'
- Books and records provision: issuers must make and keep books, records, and accounts that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets. There is no materiality threshold; a small mischaracterised payment can violate the provision.
- Internal controls provision: issuers must devise and maintain a system of internal accounting controls sufficient to provide reasonable assurance that transactions are authorised by management, recorded properly, and that access to assets is controlled.
- A violation does not require proof of a bribe; the accounting provisions are frequently charged on their own. Criminal liability requires a knowing falsification or circumvention.
- Issuers must also use good faith efforts to cause subsidiaries in which they own 50% or less to comply.

FCPA Penalties
- Anti-bribery, corporations: criminal fines up to $2 million per violation; civil penalties also apply (inflation adjusted).
- Anti-bribery, individuals: up to $250,000 and up to 5 years imprisonment per violation. Fines imposed on individuals may not be paid or reimbursed by the employer.
- Accounting provisions, corporations: up to $25 million per violation.
- Accounting provisions, individuals: up to $5 million and up to 20 years imprisonment.
- Under the Alternative Fines Act, fines can instead be up to twice the gross gain or loss from the offence.
- Collateral consequences: disgorgement of profits, debarment from government contracting, loss of export licences, independent compliance monitors, and private suits.

Part 2: The UK Bribery Act 2010

Background
Received Royal Assent in April 2010 and came into force on 1 July 2011, replacing a patchwork of older common law and statutory offences. It is widely considered the strictest anti-bribery law in the world. Enforcement is led by the Serious Fraud Office (SFO).

The Four Offences
1. Section 1: Bribing another person (active bribery). Offering, promising, or giving a financial or other advantage, intending to induce a person to perform a relevant function or activity improperly, or to reward improper performance, or where the person knows or believes acceptance itself would constitute improper performance.
2. Section 2: Being bribed (passive bribery). Requesting, agreeing to receive, or accepting a financial or other advantage intending that a relevant function be performed improperly, or where the request or acceptance itself is improper, or as a reward for improper performance.
3. Section 6: Bribery of a foreign public official. Offering, promising, or giving an advantage to a foreign public official (or to another at the official's request or acquiescence) with the intent to influence the official in his or her official capacity, and to obtain or retain business or a business advantage. Unlike Sections 1 and 2, the prosecution does not need to prove improper performance, only intent to influence. The payment must not be permitted by the written law applicable to the official.
4. Section 7: Failure of a commercial organisation to prevent bribery. A strict liability corporate offence. A relevant commercial organisation is guilty if an associated person (employee, agent, subsidiary, or anyone performing services on its behalf) bribes another person intending to obtain or retain business or a business advantage for the organisation. No corrupt intent or knowledge by senior management is required. The only defence is that the organisation had adequate procedures in place designed to prevent bribery.

Key Concepts
- Relevant function or activity: any function of a public nature, any activity connected with a business, any activity performed in the course of employment, or any activity performed by or on behalf of a body of persons, where the person performing it is expected to act in good faith, impartially, or is in a position of trust. This is why the Act covers private-sector (commercial) bribery, not only public officials.
- Improper performance: performance that breaches the relevant expectation of good faith, impartiality, or trust, judged by what a reasonable person in the UK would expect. Local custom is disregarded unless it is part of the written law.
- Associated person: anyone who performs services for or on behalf of the organisation, determined by all the circumstances, not just the label. This commonly includes agents, intermediaries, joint venture partners, and subsidiaries.
- Relevant commercial organisation: a body or partnership incorporated or formed in the UK that carries on business anywhere, or any body or partnership, wherever incorporated, that carries on a business or part of a business in the UK. A U.S. company with a UK office can be prosecuted under Section 7 for a bribe paid in Asia by an agent with no UK connection.
- Jurisdiction for Sections 1, 2, and 6: the act or omission occurs in the UK, or the person has a close connection with the UK (British citizen, UK resident, or body incorporated in the UK), regardless of where the conduct occurs.
- Senior officer liability (Section 14): where a corporate body commits a Section 1, 2, or 6 offence with the consent or connivance of a senior officer, that officer is also guilty.

The Six Principles of Adequate Procedures (Ministry of Justice Guidance)
1. Proportionate procedures tailored to the organisation's size, nature, and bribery risks.
2. Top-level commitment from the board and senior management, fostering an anti-bribery culture.
3. Risk assessment that is periodic, informed, and documented (country, sector, transaction, business opportunity, and business partnership risks).
4. Due diligence on associated persons, applying a proportionate and risk-based approach.
5. Communication, including training, so policies are embedded and understood internally and externally.
6. Monitoring and review of procedures with improvements where necessary.

UK Bribery Act Penalties
- Individuals: up to 10 years imprisonment and/or an unlimited fine.
- Organisations: an unlimited fine, plus potential debarment from public contracts in the EU and UK, confiscation orders, and Deferred Prosecution Agreements (available in the UK since 2014).

Hospitality and Facilitation Payments Under the UK Act
- There is no facilitation payment exception. Grease payments are bribes, although the SFO has stated it will consider prosecutorial discretion for isolated incidents and self-reporting.
- There is no specific affirmative defence for promotional expenses, but the Ministry of Justice guidance states that reasonable, proportionate, bona fide hospitality intended to improve the organisation's image or establish cordial relations is not intended to be criminalised. Lavish hospitality that is intended to induce improper performance is an offence.

Part 3: Side-by-Side Comparison (High-Yield Exam Material)

Scope of recipient: FCPA covers only foreign officials, parties, candidates, and intermediaries passing money to them. UKBA covers foreign public officials and private-sector commercial bribery and domestic public officials.
Passive bribery (receiving a bribe): FCPA does not criminalise the recipient. UKBA Section 2 criminalises requesting or accepting a bribe.
Facilitation payments: FCPA has a narrow exception. UKBA has none.
Promotional expenses: FCPA provides an affirmative defence for reasonable and bona fide expenses. UKBA has no statutory defence, relying on guidance that proportionate hospitality is not improper.
Local law: FCPA has an affirmative defence if the payment is lawful under written local law. UKBA Section 6 similarly requires that the advantage not be permitted by the written law applicable to the official; local custom is irrelevant under both.
Intent requirement: FCPA requires a corrupt intent and a business purpose. UKBA Sections 1 and 2 require intent to induce or reward improper performance; Section 6 requires intent to influence and obtain business; Section 7 requires no intent by the company (strict liability).
Corporate liability: FCPA uses traditional respondeat superior (employees and agents acting within scope of employment to benefit the company). UKBA Section 7 imposes strict liability for failure to prevent bribery by associated persons, with the adequate procedures defence.
Accounting provisions: FCPA has explicit books and records and internal controls requirements for issuers. UKBA has no accounting provisions (UK companies are instead subject to the Companies Act and other laws).
Penalties for individuals: FCPA anti-bribery: up to 5 years; accounting: up to 20 years. UKBA: up to 10 years and unlimited fines.
Jurisdiction: FCPA reaches issuers, domestic concerns, and anyone acting in U.S. territory. UKBA reaches UK persons and entities anywhere, anyone acting in the UK, and under Section 7, any organisation carrying on part of a business in the UK.

Part 4: How These Laws Work in Practice
- Third-party intermediaries (agents, consultants, distributors, joint venture partners) are the most common vehicle for foreign bribery. Red flags include requests for unusually high commissions, payments to offshore accounts or to third countries, agents recommended by the official, refusal to sign anti-corruption certifications, lack of qualifications or staff, and a family or business relationship with government officials.
- Bribes are typically disguised in the books as consulting fees, marketing expenses, commissions, discounts, or miscellaneous expenses, which is precisely why the FCPA accounting provisions exist.
- Both regimes reward voluntary self-disclosure, cooperation, and remediation. The DOJ's Corporate Enforcement Policy and UK Deferred Prosecution Agreements reflect this.
- Successor liability: an acquiring company can inherit the FCPA violations of a target, making pre-acquisition anti-corruption due diligence critical.
- Many other countries have enacted similar laws under the OECD Anti-Bribery Convention, which requires signatories to criminalise bribery of foreign public officials. The FCPA 1998 amendments implemented the Convention in the U.S.

Exam Tips: Answering Questions on FCPA and UK Bribery Act Elements

Tip 1: Identify which statute the question is testing. If the scenario mentions a U.S. issuer, domestic concern, interstate commerce, foreign official, or grease payment, think FCPA. If it mentions a commercial organisation, associated person, adequate procedures, improper performance, or private-sector bribery, think UK Bribery Act.

Tip 2: Memorise the differences list. The most frequently tested distinctions are: (a) facilitation payments are excepted under the FCPA but illegal under the UKBA; (b) the UKBA covers commercial (private-to-private) bribery and the FCPA does not; (c) the UKBA criminalises receiving a bribe and the FCPA does not; (d) Section 7 is strict liability with an adequate procedures defence; (e) the FCPA has accounting provisions and the UKBA does not.

Tip 3: Remember that an offer or promise is enough. Under both laws, the bribe need not be paid, accepted, or successful. If a question states that the official refused the money, the offence is still complete.

Tip 4: Know who is a foreign official. Employees of state-owned enterprises, low-level clerks, and officials of public international organisations all qualify under the FCPA. A question asking whether a payment to a doctor at a state-run hospital falls under the FCPA should be answered yes.

Tip 5: Distinguish 'exception' from 'affirmative defence.' The facilitating payment rule is an exception (the government must prove the payment was not a facilitating payment). The local-law and bona fide expenditure rules are affirmative defences (the defendant must prove them). Exam questions sometimes test this terminology.

Tip 6: Willful blindness is knowledge. If a scenario describes an executive who suspects an agent is bribing officials but deliberately avoids asking, the executive meets the FCPA knowing standard. 'Head in the sand' is never a defence.

Tip 7: Accounting provisions apply only to issuers and have no materiality threshold. A $500 bribe recorded as 'entertainment' by an SEC registrant violates the books and records provision. A privately held domestic concern is subject to the anti-bribery provisions but not the accounting provisions.

Tip 8: Know the penalty structure in general terms. Expect questions on: individual fines cannot be reimbursed by the employer (FCPA); the Alternative Fines Act allows twice the gain or loss; UKBA individuals face up to 10 years; UKBA fines are unlimited; FCPA accounting violations carry up to 20 years for individuals.

Tip 9: Local custom is never a defence. Under the FCPA the payment must be lawful under the written law of the country. Under the UKBA, improper performance is judged by a reasonable person in the UK, and local custom is disregarded unless it is written law. Answer choices that rely on 'it is customary in that country' are wrong.

Tip 10: For Section 7 questions, look for the adequate procedures defence and the six principles. If asked how a company can avoid liability for a bribe paid by its agent abroad, the answer is demonstrating adequate procedures (proportionate procedures, top-level commitment, risk assessment, due diligence, communication and training, monitoring and review). The company's lack of knowledge is not a defence.

Tip 11: Watch for reach-of-jurisdiction traps. A foreign company with no U.S. listing can still violate the FCPA if an act in furtherance of the bribe occurs in U.S. territory (e.g., a wire transfer through a U.S. bank or a meeting in New York). A U.S. company with a UK branch can be prosecuted under UKBA Section 7 for a bribe paid anywhere in the world by any associated person.

Tip 12: Read carefully for 'NOT' and 'EXCEPT' questions. Many questions ask which statement is NOT an element or which payment would NOT qualify as a facilitating payment. Remember that decisions to award or continue business are never routine governmental action.

Quick-Recall Summary
FCPA = 1977, U.S. issuers, domestic concerns, persons in U.S. territory; corrupt payment of anything of value to a foreign official to obtain or retain business; facilitating payment exception; two affirmative defences; accounting provisions for issuers; DOJ and SEC enforcement.
UKBA = 2010 (in force 2011); four offences (bribing, being bribed, bribing a foreign public official, corporate failure to prevent); covers public and private bribery; no facilitation payment exception; strict liability under Section 7 with adequate procedures defence and six principles; 10 years and unlimited fines; SFO enforcement.
Master these elements and distinctions and you will be well prepared for any FCPA or UK Bribery Act question on the CFE Exam.