In 1977, the United States enacted the Foreign Corrupt Practices Act (FCPA). The FCPA prohibits an offer, payment, promise or the authorization of a payment of money or anything of value (a/k/a bribery) to a foreign official for the purpose of obtaining or retaining business. Moreover, it prohibits individuals and businesses from knowingly falsifying books and records, knowingly circumventing or failing to implement a system of internal controls that might otherwise prevent the occurrence of FCPA offenses.
FCPA Investigations may also focus on included tax and money laundering offenses, involving cooperation among federal, state, local and international law enforcement agencies. Knowingly filing a U.S. tax return that includes tax deductions for FCPA related costs is a specified tax offense in and of itself. As such, individuals or businesses that violate the FCPA could also face US Tax crimes charges.
IRS is a “Follow the Money” Expert
IRS has the necessary experience to analyze financial records and related tax returns in order to reveal inaccurate classifications of bribery payments. IRS is Often drafted to assist during investigations and related prosecutions of FCPA offenses.
IRS agents are trained to analyze financial records for patterns in payments. It possesses experience with investigating corporate shell structures which can be part of an ongoing criminal attempt to obtain bribes and then conceal the location of the money. The IRS can spot mischaracterizations of bribery payments in financial statements and tax returns as well as in a company’s books and records.
Bribery has a history of being characterized as legitimate payment for goods and services
These are examples of classifications used for the mischaracterization of corrupt payments (bribes) as legitimate payments:
• Commissions or Royalties
• Consulting Fees
• Sales and Marketing Expenses
• Scientific Incentives or Studies
• Travel and Entertainment Expenses
• Rebates or Discounts
• After Sales Service Fees
• Miscellaneous Expenses
• Petty Cash Withdrawals
• Free Goods
• Intercompany Accounts
• Supplier / Vendor Payments
• “Customs Intervention” Payments
Examples of Actions Taken to Obtain or Retain Business are:
• For the purpose of winning a contract
• Influencing the procurement process
• Circumventing the rules for importation of products
• Gaining access to non-public bid tender information
• Evading taxes or penalties
• Influencing the adjudication of lawsuits or enforcement actions
• Obtaining exceptions to regulations
• Avoiding contract termination
Individuals and or Businesses lacking FCPA compliance training ought to consult a Corporate Governance Expert with experience relating to how the IRS identifies payments that have been inaccurately characterized in a bribery scheme
Companies of all sizes in all industries are responsible for ensuring that they are in compliance with the FCPA. Senior Level Executives have a responsibility for ensuring that they implement FCPAs policies and procedures, hire experienced compliance professionals, provide effective training for relevant employees (including human resources) and appropriately screen consultants or third-party representatives and or vendors.
In order to be able to properly analyze the causes of the misconduct and timely and appropriately remediate those causes to prevent future compliance breaches, companies ought to consult their Corporate Governance Expert.
Do you have a Corporate Governance Expert?