Small Bribes Buy Big Problems

The United States leads the world in fines, jail terms, and other penalties for the payment of bribes overseas. An aggressive prosecutorial climate, fuelled by reporting requirements under Sarbanes-Oxley, has moved this issue to center stage for in-house counsel and compliance officers. Companies spend a fortune vetting their third party intermediaries and reviewing any gifts or meals provided to foreign government officials lest the latter be deemed an “inappropriate payment.” Yet, the United States is also one of the few countries that raises no objection to the payment of what it euphemistically calls a “facilitating payment” overseas. These are typically small payments to prompt a low-level government official to do what he or she is supposed to do anyway: stamp your passport, provide police protection, clear your goods through customs, or hook up your phone. The US anti-bribery law, the Foreign Corrupt Practices Act (FCPA) expressly carves out these payments as an exception to its otherwise onerous anti-bribery law. A relic from the days when companies thought there wasn’t much they could do to avoid paying these bribes, these payments linger on in a sort of legal limbo. The enforcement authorities now lag behind many US corporations which have abolished these payments. Companies are beginning to see facilitating payments for what they are: a violation of foreign law (no country permits you to bribe their officials regardless of what the bribe is called), an invitation to books and record violations (few employees can bring themselves to record these bribes accurately), and corrosive of good governance more generally (companies are uncomfortable leaving definitions of permissible versus impermissible bribes in the hands of their employees).

Most multinational companies have made progress toward eliminating traditional bribes from their business practices. They have done this by implementing comprehensive compliance programs, by training local and foreign employees and business intermediaries, and by rigorous internal enforcement. Now some of these companies are taking steps to eliminate “facilitating payments” from their business practices as well. These small bribes, permitted under the FCPA, are made to foreign government officials to encourage them to perform or expedite routine, nondiscretionary governmental tasks.

In this article, we will illustrate how making “facilitating payments” leads to problems, and provide suggestions on how companies can implement and enforce their own internal policy against bribes of any kind, both large and small. Much of the following guidance was developed from a recent TRACE survey in which 42 companies engaged in international business were interviewed to learn how they have stopped paying small bribes to government officials. Many of the companies interviewed have found that it is possible—occasionally even easy—to refuse to participate in bribery schemes. There are certain techniques that work and certain practices to avoid.

Alexandra Wrage is a lawyer and president of TRACE, a nonprofit business association that conducts benchmarking research on all aspects of antibribery compliance and provides companies with tools that improve their antibribery programs while lowering their compliance costs. Prior to joining TRACE, she was in-house with two major multinational companies. She is based in Annapolis, MD and can be reached at wrage@traceinternational.org.

Matthew Vega is an in-house attorney with Federal Express Corporation with over 10 years of in-house corporate experience with three Fortune 500 companies. He provides legal advice to the company on compliance with the Foreign Corrupt Practice Act (FCPA) and other regulatory matters. He is based in Memphis, TN, and can be reached at mavega@fedex.com.

The views expressed in this article are the authors’ own and are not being expressed on behalf of their companies.