Winning Business Through Bribery Could Get You Into Trouble! was published by JD Supra on 1/8/19.
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.
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
The FCPA applies to:
- Domestic Concerns: US persons and businesses, their officers, directors, employees, agents, and controlling shareholders
- Issuers: US and foreign public companies listed on stock exchanges in the US
- Territorial Jurisdiction: Foreign persons and businesses acting while in the territory of the US
- Third parties: Those making indirect 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
IRS is also involved with investigating and prosecuting bribery
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 an offense in and of itself. As such, individuals or businesses that violate the FCPA could also face US Tax crimes charges.
IRS Criminal Investigations has the necessary experience to analyze financial records and related tax returns in order to reveal misclassifications of bribery payments.
As a result of its expertise with “Following the Money” and uncovering the concealment of corrupt financial transactions, IRS Criminal Investigations is a “player” during investigations and related prosecutions of FCPA offenses.
Don’t be a victim of your own making
Individuals and or Businesses lacking FCPA compliance training ought to consult a specialized tax representative with experience relating to how the IRS can identify and trace payments that have been mischaracterized in a bribery scheme. Willful failure of a Taxpayer to pay taxes and obstruct justice via a violation of the FCPA can lead to criminal and civil penalties for companies and individuals including imprisonment.