Within the United States federal legislation, a facilitating payment or grease payment, as defined by the Foreign Corrupt Practices Act (FCPA) of 1977 and clarified in its 1988 amendments, is a payment to a foreign official, political party or party official for "routine governmental action", such as processing papers, issuing permits, and other actions of an official, in order to expedite performance of duties of non-discretionary nature, i.e., which they are already bound to perform.
What are facilitation payments?
Facilitating payments are payments made to officials with the intention of expediting an administrative process. The payment is meant to smooth the process of a service that the payer is legally entitled to. In some countries facilitating payments is prohibited by law and is considered bribes.
What is the FCPA’s facilitation payments exception?
But, like the FCPA’s anti-bribery provisions more generally, the facilitating payments exception focuses on the purpose of the payment rather than its value.” [emphasis on original text] Interestingly, one of the clearest statements about facilitation payments comes not from a FCPA case about facilitation payments but the case of Kay v.
Can a company make a facilitating payment to an official?
The company may make a facilitating payment to an official who can help “expedite” the licensing or permitting process. In many countries, this payment would be acceptable as long as it does not involve a payment made to a foreign entity.
Are facilitation payments illegal in the UK?
These laws apply only when they are made abroad and paradoxically, remain illegal in their own domestic laws. It should be noted that as facilitation payments are often hidden in the books, they can lead to a books and records offence under the FCPA.
What is considered a facilitation payment?
A small bribe, also called a 'facilitating', 'speed' or 'grease' payment; made to secure or expedite the performance of a routine or necessary action to which the payer has legal or other entitlement.
What is understood by facilitating payments under the FCPA?
Facilitating payments are an exemption to the FCPA, NOT an affirmative defense. This means that the accused company can claim an alleged bribe was a facilitating payment and the burden of proof is on the government to prove otherwise.
Does the FCPA include facilitation payments exception?
There are two affirmative de- fenses under the FCPA. The exception and the two affirmative defenses are discussed in greater detail below. The FCPA does not apply to any “facilitating or expe- diting payment,” the purpose of which is to expedite or secure the performance of a “routine governmental action.”
Are facilitation payments legal in US?
Facilitating payments may still violate the FCPA's accounting provisions if they are not “accurately and fairly” recorded in “reasonable detail” in an issuer's books and records. In addition, most laws prohibiting bribery in other countries do not include a corresponding exception.
What are the three 3 accounting provisions under the FCPA?
Transactions should be recorded in a manner which allows for the accurate preparation of financial statements. Transactions should be recorded to evaluate/enforce accountability. Accounts/assets should only be accessible with proper managerial authorization.
Are facilitation payments illegal?
Facilitation payments were illegal before the Bribery Act came into force and they are illegal under the Bribery Act, regardless of their size or frequency.
Which of the following is true of facilitation payments under the Foreign Corrupt Practices Act FCPA )?
Which of the following is true of facilitation payments under the Foreign Corrupt Practices Act (FCPA)? The FCPA finds them acceptable if they expedite a routine governmental action.
What types of payments are legal and illegal under the Foreign Corrupt Practices Act FCPA of the United States?
FCPA makes it unlawful for a U.S. person or company to offer, pay, or promise to pay money to any foreign official for the purpose of obtaining or retaining business.
Which of the following is allowed under the FCPA?
The act prohibits bribery of foreign officials and intends to deter corruption and abuses of power worldwide. The FCPA contains policies for governing the actions of publicly traded companies, their directors, officers, shareholders, agents, and employees.
What is not considered a facilitation payment?
The term facilitation payment originates from the FCPA and usually covers payments made to officials to obtain or speed up routine services which the officials are required to provide. It does not include payments made directly to obtain or retain business.
Are facilitation payments ethical?
While being legal, facilitating payments are still considered to be questionable from the point of view of business ethics. The following arguments have been made: unfair competition: smaller business have fewer opportunities and less financial possibilities to "grease" foreign officials.
What countries allow facilitation payments?
According to Trace International1, countries that permit facilitation payments are Australia, New Zealand South Korea and the US.
What does the US Foreign Corrupt Practices Act allow the payment of?
The Foreign Corrupt Practices Act (FCPA), enacted in 1977, generally prohibits the payment of bribes to foreign officials to assist in obtaining or retaining business.
Are facilitating payments speed payments ethical?
While being legal, facilitating payments are still considered to be questionable from the point of view of business ethics. The following arguments have been made: unfair competition: smaller business have fewer opportunities and less financial possibilities to "grease" foreign officials.
What are grease payments and are they acceptable by the US law and the OECD Convention?
Commonly known as "grease payments," these small bribes are permitted for "routine governmental actions," a concept that is difficult to reconcile both in the law and in corporate codes of conduct.
Which act creates an exemption for facilitation payments?
However, the FCPA exempts facilitation payments, that is, payments made to facilitate routine governmental action such as processing various permits and approvals, providing police protection, access to utilities such as water, power, and gas.
What is a C.A.F.P.?
The Committee to Address Facilitation Payments (C.A.F.P.) is a collection of g lobal companies working together to address the potential future demand/risk of facilitation type payments in a thoughtful, proactive and appropriate manner. It recently released this document and below Mike Munro (Vice President, Associate General Counsel and Chief Compliance Officer, Transocean, and a member of the Global Steering Team for C.A.F.P.) responds to some questions.
Is increasing civil servant pay good?
A: Increasing civil servants pay could potentially have a positive impact but how positive of an impact would be difficult to determine. Clearly if an individual’s pay is not sufficient to meet daily living requirements, most would agree that there is likely a higher probability of requests or demands, but as indicated above, other factors such as culture, individual integrity norms, etc. do have an impact.
Is there an indirect payment exception for foreign government?
Originally, the FCPA contained an indirect facilitation payments exception through the definition of “foreign official” which excluded from that definition any employee of a foreign government “whose duties are essentially ministerial or clerical.” Among the FCPA’s 1988 amendments was taking this indirect facilitation payments exception from the definition of “foreign official” and establishing a direct, stand-alone facilitation payment exception currently found in the statute.
What is FCPA and Facilitating Payments?
The FCPA & Facilitating Payments. In Foreign Corrupt Practices Act, SEC Whistleblower Program. In a number of our articles on the Foreign Corrupt Practices Act (FCPA), we have touched on several exemptions and “affirmative defenses” in the law. (An affirmative defense is a defense where the defendant proves a set facts that mitigate ...
What is the second affirmative defense to the FCPA?
The second affirmative defense available to FCPA defendants is “reasonable and bona fide expenditures”. The FCPA permits companies to cover “reasonable and bona fide” travel expenses for foreign officials conducting business with the company. It is legal to pay for the travel expenses of an official for things like conferences, negotiations, product demonstrations, sales pitches, training, and the like. Reasonable and bona fide expenses would include airfare, food and lodging, and a small per diem for other expenses. (See our article FCPA & Bribery: Travel Expenses Neither “Reasonable” Nor “Bona Fide” for a more detailed explanation of Department of Justice guidelines.) Keep in mind that this is an affirmative defense, so there would be a presumption that the travel constituted an FCPA violation, and the defendant would have to prove the expenses were reasonable and bona fide, rather than the burden of proof being on the government.
What are the two affirmative defenses allowed by the FCPA?
The two affirmative defenses permitted by the FCPA are very straightforward, but the major exemption- “facilitating payments”- warrants its own article. The first affirmative defense is the “local law defense”, which essentially makes a bribe legal if it is expressly permitted by local laws. In practice, however, this defense is rarely used ...
What was the purpose of the alleged intended payment?
The purpose of the alleged intended payment was to expedite a routine governmental action. “. The judge accepted the argument and acquitted Duran.
What is a non-discretionary act?
A non-discretionary act means that the government official does not have any decision-making authority over the act. For example, the clerk at the Department of Motor Vehicles does not have any discretion in deciding if you can renew your car’s registration.
Can a company claim a bribe as a facilitating payment?
This means that the accused company can claim an alleged bribe was a facilitating payment and the burden of proof is on the government to prove otherwise. But, as the DOJ’s Guide to the FCPA helpfully points out, “Labeling a bribe as a ‘facilitating payment’ in a company’s books and records does not make it one.”.
Is facilitating payments an affirmative defense?
Facilitating payments are an exemption to the FCPA, NOT an affirmative defense.
What are Facilitation Payments?
A facilitation payment is a small bribe known as a ‘grease payment’ or a ‘speed payment’ typically solicited to facilitate or expedite the performance of a routine transaction or service to which the person or company making the payment is legally entitled to receive.
What is the Difference Between Bribery and Facilitation Payments?
Facilitation payments are different from bribes in that they’re offered or solicited in return for a service a person or a company is entitled to receive. In contrast, bribes are offered in return for undue and illegal advantage.
What Countries Allow Facilitation Payments and Why?
Despite the nuance in the definition of facilitation payments and bribes, both terms are closely intertwined and are recognized as a form of bribery that has led several countries and companies to adopt a zero-tolerance policy to both types of payments.
What is the exception to the Foreign Corrupt Practices Act?
The US Foreign Corrupt Practices Act (FCPA) provides a narrow exception for facilitation payments. The exception applies only to payments made to foreign officials with the purpose to ‘facilitate or expedite routine governmental action’. The difference focuses on the purpose of the payment rather than on its value. Facilitation payments that are not properly documented may violate the FCPA’s accounting provisions.
Do companies have to disclose facilitation payments?
Companies must communicate their facilitation payment-related policies as part of the reporting requirements on their compliance programs. Companies that do not transparently include facilitation payments in their reporting can be held legally accountable under the regulations that provide exceptions for such sums.
Is facilitation payment illegal?
Facilitation payments are typically demanded by low-level and low-income officials. In some countries, it is customary to provide small unofficial payments, but the practice is illegal in most countries. Companies must communicate their facilitation payment-related policies as part of the reporting requirements on their compliance programs.
What is a facilitation payment?
The term facilitation payment originates from the FCPA and usually covers payments made to officials to obtain or speed up routine services which the officials are required to provide. It does not include payments made directly to obtain or retain business.
Is refusing to pay bribes expensive?
Resisting has costs: Refusing to pay bribes may be costly; for example, by creating delays in moving goods, especially if shipments are time-sensitive. There may be competitive disadvantage if competitors continue to pay small bribes and move goods faster.
Is facilitation payment a bribe?
Facilitation payments, which are payments to induce officials to perform routine functions they are otherwise obligated to perform, are bribes. There was no exemption for such payments under the previous law nor is there under the Bribery Act.’
What Is a Facilitating Payment?
A facilitating payment is a financial payment that may constitute a bribe and is made with the intention of expediting an administrative process. It is a payment made to a public or government official that acts as an incentive for the official to complete some action or process expeditiously, to the benefit of the party making the payment.
Is facilitation payment illegal?
Unsurprisingly, for years companies doing business on an international scale have frowned upon, if not altogether prohibited, the use of facilitation payments. While outright fraud and bribery are of central concern, another more subtle but important rationale for restricting their use arises as companies increasingly recognize facilitation payments are inconsistent with corporate governance cultures prohibiting corruption and international anti-corruption programs.
Is facilitating payments a bribe?
In some countries facilitating payments is prohibited by law and is considered bribes. The U.S. has a narrow exception for “facilitating or expediting payments” if it's made to further a routine governmental action that involves non-discretionary acts.
