FCPA: Facilitation Payments

Determining what constitutes a facilitation payment under the FCPA‘s anti-bribery provisions poses a particular challenge. In concept, the determination of what constitutes a facilitation payment has often focused on whether the conduct sought to be induced relates to “essentially ministerial actions” on the part of foreign officials that are not discretionary in nature.1

However, as pointed out in the FCPA Guidance issued by the Department of Justice and SEC, whether the act to be influenced is ministerial or clerical in nature is no longer the threshold consideration.2 Instead, “the facilitating payments exception focuses on the purpose of the payment rather than its value.”3

Prior to 1988, the “facilitating payments” exception was incorporated into the definition of “foreign official,” which excluded from the statute’s purview officials whose duties were primarily ministerial or clerical. See Foreign Corrupt Practices Act of 1977, Pub. L. No. 95-213 . . . (1977) (providing that the term foreign official “does not include any employee of a foreign government or any department, agency, or instrumentality thereof whose duties are essentially ministerial or clerical”). The original exception thus focused on the duties of the recipient, rather than the purpose of the payment. In practice, however, it proved difficult to determine whether a foreign official’s duties were “ministerial or clerical.” S. Rep. No. 100-85, at 53. Responding to criticism that the statutory language “does not clearly reflect Congressional intent and the boundaries of the prohibited conduct,” Congress revised the FCPA to define the exception in terms of the purpose of the payment. H. Rep. No. 100-40, at 77. In doing so, Congress reiterated that while its policy to exclude facilitating payments reflected practical considerations of enforcement, “such payments should not be condoned.” Id. The enacted language reflects this narrow purpose.4

This is extremely important consideration.  For example, the exception would not apply where customs clearance was sought “for equipment and materials that lacked required certifications or could not be imported under local law and to pay a lower-than-applicable duty rate.”5  Nor would the exception apply for payments “to permit the importation and exportation of equipment and materials not in compliance with local regulations and to avoid a full inspection of the imported goods.”6  Indeed, the exception would not even apply when “preferential treatment is sought during the customs process” whereby “the reduction or elimination of customs duties” may be involved.7

1United States v. Kay, 359 F.3d 738 (5th Cir. 2004).

2U.S. Dep’t of Justice & Sec. & Exch. Com’n, A Resource Guide to the U.S. Foreign Corrupt Practices Act, at 25 n. 159 (2012)

3Id. at 25 (emphasis in original).

4Id. at 25 n. 159.

5Id. at 25 (citation omitted).

6Id. (citation omitted).

7Id. (citation omitted).

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