Foreign Corrupt Practices Act FCPA Avoiding Illegal Financial

Foreign Corrupt Practices Act (FCPA) Avoiding Illegal Financial Behavior Around the World

University Expectation regarding FCPA When engaged with foreign officials while undertaking any University activity or work within the scope of University employment or utilizing University resources, University of Maryland, Baltimore personnel, including University students, staff, faculty, affiliates, consultants, agents, contractors, and volunteers are expected to understand comply with the terms of the Foreign Corrupt Practices Act (FCPA).

How to Remember What “FCPA” Stands For. . . � Farewell to Come-ons for Phony Activities � Focus on Common-sense when Paying Abroad � Forego Cash Payment Accidents � Flash: there are Criteria for Prohibited Activities � Forget Champagne and Permissive Appearances

The FCPA is federal law prohibiting individuals and organizations from: �Giving, promising or offering anything of value, whether directly or indirectly, to �Any foreign official (including an official of a public international organization) �With the intention of obtaining or retaining business or obtaining an improper business advantage

Scope of the FCPA Applies to: � Activities of any individual who is a citizen, national, or resident of the United States, also any corporation and other business entity organized under the laws of the United States, or having its principal place of business in the United States, and certain applicable foreign entities (mainly issuers of securities on a U. S. exchange � Limited to “corrupt” payment of anything of value to a foreign official, foreign political party or official thereof for the purpose of influencing any act or decision of such person to secure an improper advantage or obtain or retain business

The 2 Prongs of the FCPA Law �Anti-bribery Provisions • Unlawful for U. S. persons and companies to pay bribes to non-U. S. governmental officials for the purpose of obtaining or retaining business. �Accounting Provisions • Companies with securities listed in the U. S. must keep records that accurately and fairly reflect the transactions of the corporation and maintain an adequate system of internal accounting controls.

Penalties for violating the anti-bribery provisions of the FCPA may include: �Fines of up to $2 million against the U. S. business entity. �Prison terms of up to five years and fines of up to $100, 000 per violation for individuals involved. �The Securities and Exchange Commission may seek further civil penalties.

I Don’t Do “Business” Abroad, Do I? • • • Research, education or health initiatives may involve activities in countries where the norm is government-sponsored education and medical care. Employees of foreign entities, including health care systems, research institutes and universities are often considered government employees or “foreign officials” under FCPA. All types of activities related to international initiatives can create FCPA exposure risk.

Examples of Prohibited Action • Improper payment or inducements to: – Foreign physicians, Pharmacists, Lab technicians – Health and government ministry officials – Customs officials • Improper payment or inducements to a foreign official to facilitate: – Research or healthcare activities – Import or export of materials or equipment – Permits, permissions, licenses – Conduct of general business operations.

Red Flags Suggestions or demands to: • Take on a “partner or sponsor” to facilitate operations • Pay a “retainer” for a business connection. • Pay “procurement fees, ” or mandatory “tips” or “dash” • Provide a friend or relative with a job • Offer excessive “hospitality, ” gifts or perks • Pay expenses in the U. S. for a friend or relative

Real-life Examples • • Depuy division of J&J was fined $6. 9 million for unlawful activity in Greece. It paid millions in kickbacks to Greek health officials and physicians, and listed these payments in accounting records as “Professional Education. ” Macmillan Publishers was ordered to pay £ 11. 3 million for an attempt to bribe its way into the World Bank’s education program in south Sudan; it was banned for 6 years.

FCPA prohibitions: Do not… �Give, promise or offer anything of value, whether directly or indirectly, to �Any foreign official (including an official of a public international organization) �With the intention of obtaining or retaining business or obtaining an improper business advantage.

Terms to Understand: “Foreign Official” “Anything of Value”

Foreign Official - 1 of 2: � Any officer or employee of a foreign government or any department, agency, or instrumentality of a foreign government. � Any officer or employee of a public international organization such as the World Bank or the African Union. � Any person acting in an official capacity for any foreign‑government agency, department or instrumentality, or for a public international organization (even though not directly employed by the foreign government)

Foreign Official - 2 of 2 � Officers and employees of foreign state‑owned companies. � Uncompensated honorary officials if such officials can influence the awarding of business to a foreign official. � An entity hired to review bids on behalf of a government agency. � Members of royal families who have proprietary or managerial interests in industries and companies owned or controlled by the government.

“Anything of Value” Includes: Giving or Offering. . � Money � Gifts and offers of gifts � Stock and other equity � Payments for entertainment, travel and lodging � Charitable donations that could be a conduit for bribes � Offers of employment � Discounts not readily available to the public � Assumption or forgiveness of a debt � Personal favors

“Facilitating Payments” May Be Acceptable � Payments to government officials for routine and non-discretionary action. � Should be reviewed and approved in advance in accordance with a formal policy or process. � Record in a log or ledger with backup documentation; all subject to regular audit � Control tightly and monitor carefully � Risky - can be confused with permission to pay bribes.

The Best Defense Includes Control of Risk-related Activities �Accounting �Banking accounts �Cash disbursements �Procurement and vendor approvals �Contracts and agreements �Hospitality and gifts

Control of Risk-related Activities �Keep logs or financial books of all payments, gifts and other transactions �Write and disseminate policy and procedure for proper review and approval of transactions involving anything of value �Audit regularly with independent oversight

Other Compliance Steps to Take �Due diligence before retaining agents, consultants, representatives and other third-parties �Contracts should require anti-bribery representations and FCPA compliance �Provide FCPA training for employees, students, affiliates, volunteers, partners, agents, consultants, representatives.

For More Information. . Please Contact: Janet Simons, Export Officer jsimons@umaryland. edu University Counsel 410 -706 -5353