Gray's Summary of the Foreign Corrupt Practices Act. Gray International (Gray) is an international network of public accounting and consulting firms based in the U.S., Hong Kong, China and Europe. Gray was started over 10 years ago in the U.S. (via its predecessor) and took the form of Gray International in 2013 as the result of the networking of multiple independent practices and professionals. Gray provides international accounting and compliance solutions in the U.S., Americas, Asia and Europe. Gray focuses on U.S. accounting, tax, and governmental compliance for multinational companies, investors, U.S. persons living overseas and foreign investors and companies investing in or moving to the U.S. Gray also consults on compliance with U.S. laws for businesses and financial institutions overseas such as the Foreign Corrupt Practices Act (FCPA) and the Foreign Account Tax Compliance Act (FATCA), the IRS Offshore Voluntary Disclosure Program, and the Program for Non-Prosecution Agreements or Non-Target letters for Swiss Banks. Grays principals, partners, and employees have served clients worldwide. Gray has offices in Geneva, Hong Kong, Seattle, Shanghai and plans to open an office in Singapore in late 2013. Grays U.S. public accounting firm (Gray CPA, PC) is registered with the U.S. Public Company Accounting Oversight Board and is a member of the American Institute of Certified Public Accountants and the Center for Audit Quality. For more information about us, please visit us at: www.grayintl.com

1. U.S. FOREIGN CORRUPT PRACTICES ACT
Overview of the FCPA
International
Accounting &
Compliance
GENEVA
|
HONG
KONG
|
SEATTLE
|
SHANGHAI

2. LEGAL NOTICE
IMPORTANT LEGAL INFORMATION PLEASE READ
This
presentation
is
prepared
for
general
guidance
only,
and
does
not
constitute
the
provision
of
accounting,
legal
or
tax
advice
in
any
manner,
written
tax
advice
under
U.S.
Internal
Revenue
Service
Circular
230,
or
any
professional
advice
of
any
kind.
“Gray
International”
or
“Gray”
refers
to
Gray
CPA,
PC
(a
U.S.
CertiIied
Public
Accountant)
and
Gray
International
Ltd
(a
Hong
Kong
Limited
Company).
The
information
provided
in
this
presentation
should
not
be
a
substitute
for
consultation
with
qualiIied
professionals
who
understand
your
situation,
as
it
will
differ
from
others.
In
addition,
when
making
any
tax
planning
decisions
you
should
consult
with
your
own
legal,
tax,
accounting
and
other
professional
advisors.
This
presentation
has
been
provided
as
a
courtesy,
and
therefore
while
care
has
been
executed
in
the
preparation
of
this
information
Gray
CPA,
PC
(U.S.),
Gray
International,
Ltd.
and
all
of
their
afIiliates
make
no
representations
as
to
its
completeness,
accuracy
or
the
timeliness
of
the
information
and
takes
no
responsibility
to
update
this
information,
such
information
is
being
provided
without
warranty
of
any
kind.
IRS
Circular
230
notice:
Tax
advice,
if
any,
included
in
this
communication
(including
any
attachments)
is
not
intended
or
written
to
be
used,
and
cannot
be
used,
by
the
recipient
for
the
purpose
of
avoiding
penalties
that
may
be
imposed
under
the
U.S.
Internal
Revenue
Code
or
by
any
other
governmental
tax
authority.
©
2013
Gray
CPA,
PC
and
Gray
International
Ltd.
with
all
rights
reserved,
this
document
shall
not
be
reproduced
or
distributed
without
the
express
written
permission
of
Gray
CPA,
PC
or
Gray
International,
Ltd.
For
more
information
about
us,
please
visit
us
at
www.grayintl.com.
International
Accounting &
Compliance

3. WHO WE ARE
OUR
PROFILE
Gray
International
(“Gray”)
is
an
international
network
of
public
accounting
and
consulting
Iirms
based
in
the
U.S.,
Hong
Kong,
China
and
Europe.
Gray
was
started
over
10
years
ago
in
the
U.S.
(via
its
predecessor)
and
took
the
form
of
Gray
International
in
2013
as
the
result
of
the
networking
of
multiple
independent
practices
and
professionals.
Gray
provides
international
accounting
and
compliance
solutions
in
the
U.S.,
Americas,
Asia
and
Europe.
Gray
focuses
on
U.S.
accounting,
tax,
and
governmental
compliance
for
multinational
companies,
investors,
U.S.
persons
living
overseas
and
foreign
investors
and
companies
investing
in
or
moving
to
the
U.S.
Gray
also
consults
on
compliance
with
U.S.
laws
for
businesses
and
Iinancial
institutions
overseas
such
as
the
Foreign
Corrupt
Practices
Act
(FCPA)
and
the
Foreign
Account
Tax
Compliance
Act
(FATCA),
the
IRS
Offshore
Voluntary
Disclosure
Program,
and
the
Program
for
Non-­‐
Prosecution
Agreements
or
Non-­‐Target
letters
for
Swiss
Banks.
Gray’s
principals,
partners,
and
employees
have
served
clients
worldwide.
Gray
has
ofIices
in
Geneva,
Hong
Kong,
Seattle,
Shanghai
and
plans
to
open
an
ofIice
in
Singapore
in
late
2013.
Gray’s
U.S.
public
accounting
Iirm
(Gray
CPA,
PC)
is
registered
with
the
U.S.
Public
Company
Accounting
Oversight
Board
and
is
a
member
of
the
American
Institute
of
CertiIied
Public
Accountants
and
the
Center
for
Audit
Quality.
For
more
information
about
us,
please
visit
us
at:
www.grayintl.com
International
Accounting &
Compliance

4. WHAT WE DO
OUR SERVICES
AUDIT AND ATTEST SERVICES
INTL. FORENSIC ACCOUNTING
U.S. TAX COMPLIANCE
U.S. FATCA COMPLIANCE
INTL. TAX STRUCTURING
U.S. FCPA COMPLIANCE
International
Accounting &
Compliance

5. WHAT WE DO
OUR
PRACTICE
AREAS
AUDIT
AND
ATTEST
SERVICES
INTL.
FORENSIC
ACCOUNTING
U.S.
TAX
COMPLIANCE
Our
experienced
auditors
provide
extensive
experience
auditing
public
and
private
companies
in
the
developed
and
developing
markets.
Let
us
put
our
extensive
experience
operating
in
the
U.S.,
Asia,
Europe
and
the
Americas
to
work
for
you.
Our
forensic
accounting
services
are
designed
to
providing
vigilance
before
the
fact,
reconstructing
and
tracing
records
after
the
fact,
and
preparing
for
trial
once
the
Iindings
are
made.
Our
team
of
experts
are
available
for
worldwide
engagement.
U.S.
FATCA
COMPLIANCE
INTL.
TAX
STRUCTURING
Gray
provides
extensive
U.S.
tax
compliance
solutions
to
clients
worldwide.
We
work
with
individuals,
family
ofIices,
investors,
Iinancial
institutions,
multinational
companies
and
domestic
(U.S.)
businesses.
Let
us
guide
you
through
the
maze
of
complex
U.S.
tax
compliance.
No
single
piece
of
U.S.
legislation
will
have
a
larger
impact
on
foreign
Iinancial
institutions
and
intermediaries
in
the
next
5
years
as
FATCA.
Let
us
help
you
assess
how
this
will
impact
your
organization
and
how
to
implement
a
practical,
affordable
solution.
In
today’s
global
landscape
international
tax
structuring
and
planning
has
never
been
more
important.
From
transfer
pricing,
treaty
compliance,
withholding
minimization,
estate
planning
and
domiciliation,
to
pre-­‐residency
tax
planning
Gray
is
ready
to
help
you
navigate
this
difIicult
terrain.
U.S.
FCPA
COMPLIANCE
Widespread
globalization
brings
increased
risks
of
corrupt
practices,
and
correspondingly,
an
increase
in
FCPA
enforcement,
penalties
and
prosecutions.
Let
Gray
help
you
prepare
and
implement
appropriate
controls
to
protect
your
organization
from
violations.
International
Accounting &
Compliance

6. WHERE WE WORK
GEOGRAPHIC AREAS OF EXPERIENCE
Greenland
Alaska
Iceland
Canada
USA
Bahamas
Mexico
Belize
Guatemala
El
Salvador
Cuba
Honduras
Nikaragua
Dom.
Rep.
Jamaica
Venezuela
Costa
Rica
Guyana
Panama
Columbia
Suriname
Fr.
Guyana
Ecuador
Brazil
Peru
Norway
Sweden
Russia
Great
Germany
Belarus
Ireland
Britain
Poland
Ukraine
Kazazhstan
France
Mongolia
Romania
Uzbekistan
Kyrgysistan
Italy
North
Korea
Spain
Portugal
Turkey
Tajikistan
Japan
Greece
Syria
Turkmenistan
China
South
Korea
Tunisia
Lebanon
Iraq
Iran
Afghanistan
Morocco
Bhutan
Israel
Nepal
Qatar
Algeria
Libya
Pakistan
Saudi
Westsahara
Taiwan
Egypt
Myanmar
Arabia
U.A.E
India
Laos
Eritrea
Oman
Mauritania
Bangladesh
Mali
Niger
Vietnam
Chad
Senegal
Yemen
Sudan
Cambodia
Burkina
Guinea
Philippines
Nigeria
Thailand
Ethiopia
Sierra
Leone
C.A.R.
Kamerun
Somalia
Malaysia
Liberia
Togo
Uganda
Ghana
Cote
d‘Ivoire
Gabun
D.
R.
Kenya
Congo
Indonesia
Tanzania
R.
Congo
Angola
Bolivia
Paraguay
Finland
Namibia
Zambia
Papua
New
Guinea
Mozambique
Zimbabwe
Botswana
Madagascar
Australia
Swaziland
South
Africa
Chile
Uruguay
Argenena
Lesotho
New
Zealand
International
Accounting &
Compliance

7. THE U.S. FOREIGN CORRUPT
PRACTICES ACT
A BRIEF OVERVIEW
International
Accounting &
Compliance

8. INTRODUCTION
The
(U.S.)
Foreign
Corrupt
Practices
Act1
(“FCPA”
or
“the
Act”)
was
enacted
by
congress
in
1977
in
response
to
revelations
of
widespread
bribery
of
foreign
ofIicials
by
U.S.
companies.
The
Act
makes
it
illegal
for
U.S.
companies
or
individuals
(domestic
concerns),
public
companies
listed
on
stock
exchanges
in
the
United
States
or
who
are
required
to
Iile
reports
with
the
Securities
and
Exchange
Commission
(Issuers),
acting
anywhere
in
the
world,
to
directly
or
indirectly,
offer
or
pay
anything
of
value
to
foreign
ofIicials
for
the
purpose
of
obtaining
or
retaining
business.
The
accounting
provisions
of
the
act
requires
issuers
to
make
and
keep
accurate
books
and
records
and
to
devise
and
maintain
an
adequate
system
of
internal
accounting
controls.
The
U.S.
Department
of
Justice
(DOJ)
and
the
Securities
and
Exchange
Commission
(SEC)
share
FCPA
enforcement
authority.
The
FCPA
is
a
sweeping
law
with
widespread
implication
for
any
U.S.
persons
or
companies
doing
business
internationally.
Due
to
the
pace
of
globalization
(and
other
factors),
the
U.S.
government
has
increased
enforcement
efforts
resulting
in
massive
Iines
and
jail
time
for
violators.
As
a
result
of
the
increased
scrutiny,
companies
and
individuals
doing
business
internationally
face
an
increasing
range
of
exposure
under
the
FCPA.
Even
for
small
organizations
and
relatively
minor
infractions
the
Iines
and
penalties
are
so
signiIicant
they
can
result
in
the
insolvency
of
the
organization.
Any
U.S.
business
doing
business
overseas
should
have
a
compliance
strategy,
continuously
monitor
compliance
and
be
acutely
aware
of
the
risks
to
the
organization
and
its
principals.
1.
(15
U.S.C.
§§
78dd-­‐1,
78dd-­‐2,
78dd-­‐3,
78m)
International
Accounting &
Compliance

9. DOES THE FCPA APPLY TO ME?
The
FCPA
has
a
broad
range
of
individuals
and
businesses
that
it
applies
to
including:
§
“Issuers”
(including
foreign
companies,
explanation
below),
their
ofIicers,
directors,
employees,
agents
and
shareholders
§
Domestic
concerns
§
Foreign
companies
while
acting
in
the
territory
of
the
United
States
(either
directly
or
through
an
agent)
A
company
is
an
“issuer”
under
the
FCPA
if
it
has
a
class
of
securities
registered
under
Section
12
of
the
Exchange
Act
or
is
required
to
Iile
periodic
or
other
reports
with
the
SEC
under
Section
15(d)
of
the
exchange
act.
In
practice
this
means
that
any
company
with
a
class
of
securities
listed
on
a
national
securities
exchange
in
the
U.S.,
or
any
company
with
a
class
of
securities
quoted
in
the
over-­‐the-­‐counter
market
in
the
U.S.
(and
required
to
Iile
periodic
reports
with
the
SEC)
is
an
issuer.
Domestic
concerns
(15
U.S.C.
§
78dd-­‐2)
are
further
deIined
as
any
individual
who
is
a
citizen,
national,
or
resident
of
the
U.S.,
or
any
corporation,
partnership,
association,
joint-­‐stock
company,
business
trust,
unincorporated
organization,
or
sole
proprietorship
that
is
organized
under
the
laws
of
the
U.S.
or
its
states,
territories,
possessions
or
commonwealths
or
that
is
has
its
principal
place
of
business
in
the
U.S.
OfIicers,
directors,
employees,
agents,
or
stockholders
acting
on
behalf
of
a
domestic
concern,
including
foreign
nationals
or
companies
are
also
covered.
A
company
does
not
need
to
be
a
U.S.
Company,
nor
have
any
place
of
business
in
the
U.S.
to
be
deemed
an
issuer.
International
Accounting &
Compliance

10. FCPA: THE PROVISIONS
The
FCPA
addresses
the
issue
of
international
corruption
with
two
provisions,
the
anti-­‐bribery
provisions
and
the
accounting
provisions
as
described
below:
§
Anti-­‐bribery
provisions:
These
provisions
prohibit
individuals
and
business
from
bribing
foreign
government
ofIicials
in
order
to
obtain
or
retain
business.
§
The
accounting
provisions:
These
provisions
impose
certain
requirements
on
issuers,
and
prohibit
individuals
and
companies
from
knowingly
falsifying
an
issuer’s
books
and
records
or
circumventing
or
failing
to
implement
an
issuer’s
system
of
internal
controls
(note:
these
provisions
only
apply
to
issuers).
Violations
of
the
FCPA
can
lead
to
civil
and
criminal
penalties,
sanctions,
and
remedies,
including
Iines,
disgorgement,
and/or
imprisonment.
International
Accounting &
Compliance

11. ANTI-BRIBERY PROVISIONS
The
FCPA’s
anti-­‐bribery
provisions
make
it
unlawful
to
pay,
offer
to
pay,
promise
to
pay,
or
authorize
to
pay
money
or
anything
of
value
to
a
foreign
ofIicial
in
order
to
inIluence
any
act
or
decision
of
the
foreign
ofIicial
in
his
or
her
ofIicial
capacity
or
to
secure
any
other
improper
advantage
in
order
to
obtain
or
retain
business.
The
FCPA
anti-­‐bribery
provisions
can
apply
to
conduct
both
inside
and
outside
the
United
States.
Issuers
and
domestic
concerns
–
as
well
as
their
ofIicers,
directors,
employees,
agents,
or
stockholders
–
may
be
prosecuted
for
using
the
U.S.
mails
or
any
means
or
instrumentality
of
interstate
commerce
in
furthers
of
a
corrupt
payment
to
a
foreign
ofIicial.
The
act
deIines
“interstate
commerce”
as
“trade,
commerce,
transportation,
or
communication
among
several
states,
or
between
any
foreign
country
and
any
State
or
between
any
State
and
any
place
or
ship
outside
thereof…”
the
Term
also
includes
the
intrastate
use
of
any
interstate
means
of
communications,
or
any
other
interstate
instrumentality.
Placing
a
telephone
call,
sending
an
e-­‐mail,
text
message
or
fax,
from,
to,
or
through
the
U.S.
involves
interstate
commerce.
International
Accounting &
Compliance

12. ANTI-BRIBERY PROVISIONS: BUSINESS PURPOSE REQUIRED
The
FCPA
applies
only
to
payments
intended
to
induce
or
inIluence
a
foreign
ofIicial
to
use
his
or
her
position
“in
order
to
assist…
in
obtaining
or
retaining
business
for
or
with,
or
directing
business
to,
any
person
(note:
meaning
applicable
entities
or
persons).
This
requirement
is
known
as
the
“business
purpose
test
“and
it
is
broadly
interpreted
by
the
U.S.
Government
and
courts.
SpeciIically,
the
FCPA
also
prohibits
bribes
in
the
conduct
of
business
or
to
gain
a
business
advantage.
Examples
of
actions
taken
to
obtain
or
retain
business
are
as
follows:
•
•
•
•
•
•
•
Winning
a
contract
InIluencing
the
procurement
process
Circumventing
the
rules
for
importation
of
products
Gaining
access
to
non-­‐public
bid
tender
information
Evading
taxes
or
penalties
InIluencing
the
adjudication
of
lawsuits
or
enforcement
actions
Obtaining
exceptions
to
regulations
International
Accounting &
Compliance

13. ANTI-BRIBERY PROVISIONS: WHO IS A FOREIGN OFFICIAL?
The
designation
of
“foreign
ofIicial”
is
broad
and
can
include
individuals
that
would
not
have
otherwise
been
considered
“ofIicials”
under
a
traditional
deIinition.
These
include:
•
Any
ofIicer
or
employee
of
a
foreign
government
or
any
department,
agency,
instrumentality
thereof;
•
Any
ofIicer
or
employee
of
a
public
international
organization;
•
Any
person
acting
in
an
ofIicial
capacity
for
or
on
behalf
of
any
such
government,
department,
agency
or
instrumentality;
•
Any
person
acting
in
an
ofIicial
capacity
for
on
on
behalf
of
any
such
public
international
organization.
The
FCPA
broadly
applies
to
corrupt
payments
“any”
ofIicer
or
employee
of
a
foreign
government
and
to
those
acting
on
the
foreign
government’s
behalf.
This
means
that
the
FPCA
covers
both
low
ranking
and
high
ranking
ofIicials.
In
addition,
the
inclusion
of
the
language
“department,
agency
or
instrumentality
of
a
foreign
government”
includes
an
even
wider
range
of
potential
government
ofIicials.
This
can
include
(and
it
is
of
particular
note
when
doing
business
in
developing
countries)
ofIicers,
employees,
agents
of
state
owned
or
state-­‐controlled
entities.
There
is
no
“bright
line”
when
evaluating
whether
a
company
is
considered
an
instrumentality
of
a
foreign
government.
It
is
advisable
in
cases
where
this
is
not
clear
to
perform
a
fact-­‐speciIic
analysis
of
an
entity’s
ownership,
control,
status,
and
function
to
make
a
determination.
Public
international
organization
is
any
organization
designed
as
such
by
Executive
Order
under
the
International
Organizations
Immunities
Act,
22
U.S.C.
§
288
or
any
other
organization
that
the
president
so
designates.
These
include
organizations
such
as:
the
World
Bank,
the
International
Monetary
Fund,
the
World
Intellectual
Property
Organization,
the
World
Trade
Organization,
the
OECD,
the
Organization
of
American
States
and
numerous
others.
International
Accounting &
Compliance

14. ANTI-BRIBERY PROVISIONS: 5 ELEMENTS NEEDED FOR A VIOLATION
In
order
for
a
payment
(or
promise
of
payment)
to
constitute
a
violation,
Iive
elements
exist:
•
The
U.S.
government
has
jurisdiction
over
the
party
involved.
•
The
regulated
party
makes
a
payment,
offer,
promise
to
pay,
or
authorization
to
pay
or
offer
anything
of
value.
•
The
payment
is
made
to
a
foreign
ofIicial.
•
The
person
making
or
authorizing
the
payment
has
a
corrupt
intent
(it
is
intended
that
the
payment
induce
its
recipient
to
misuse
his
ofIicial
position).
•
The
purpose
of
the
payment
is
to
inIluence
a
government
ofIicial’s
actions
or
decisions,
or
lack
of,
that
violate
the
ofIicial’s
or
other
government
ofIicial’s
duties
or
responsibilities.
International
Accounting &
Compliance

15. ANTI-BRIBERY PROVISIONS: LIABILTY FOR THIRD PARTIES
Under
the
theory
of
vicarious
liability,
individuals
and
organizations
subject
to
jurisdiction
under
the
act,
can
be
held
liable
for
the
violations
of
third
parties.
This
means
that
if
an
organization
participates
in
transactions
with
third
parties
(ex:
sales
agents,
consulting
companies,
consultants,
attorneys,
lobbyists,
governmental
relations
Iirms,
agents,
etc.)
where
the
organization
had
knowledge
that
all
or
a
portion
of
such
transaction
(money
or
thing
of
value)
will
be
offered,
given,
or
promised,
directly
or
indirectly,
to
a
foreign
ofIicial
it
can
be
held
liable
and
prosecuted
under
the
act.
In
this
context
“knowledge”
includes
both
“conscious
disregard”
and
“deliberate
ignorance.”
This
means
that
you
can
be
prosecuted
even
if
you
do
not
have
direct
knowledge
of
the
speciIic
act
or
action.
The
provisions
for
third
party
liability
has
wide
ranging
applicability
in
the
developing
markets
where
payments
to
government
ofIicials
may
be
seen
as
the
“cost
of
doing
business”
and
structured
through
third
parties
so
that
the
beneIiciary
can
feign
ignorance
of
the
transaction.
There
is
further
liability
for
aiding
and
abetting
and
conspiracy
which
will
not
be
discussed
in
this
presentation.
International
Accounting &
Compliance

16. ANTI-BRIBERY PROVISIONS: SUCCESSOR LIABILITY
When
a
company
merges
with
or
acquires
another
company,
the
successor
company
assumes
the
predecessor
company’s
liabilities.
These
liabilities
include
liability
under
the
FCPA.
Some
general
rules
for
successor
liability
as
it
applies
to
the
FCPA
are
listed
below:
•
Whether
successor
liability
applies
to
a
particular
corporate
transaction
depends
on
the
facts
and
circumstances
and
applicable
federal,
state,
and
foreign
law.
•
Liability
cannot
be
created
by
transaction
where
it
would
have
otherwise
not
have
existed
before.
This
means
that
if
a
U.S.
parent
acquires
a
foreign
company
which
was
not
previously
subject
to
FCPA’s
jurisdiction,
the
acquisition
of
the
foreign
company
would
not
retroactively
create
FCPA
liability
for
the
acquiring
company.
Any
company
considering
the
acquisition
of
another
business
which
operates
or
conducts
business
internationally
should
conduct
pre-­‐acquisition
due
diligence
to
identify
either
violations
or
internal
control
weaknesses
which
could
result
in
violations.
In
a
signiIicant
number
of
instances
the
DOJ
and
SEC
have
declined
to
take
action
against
companies
that
have
voluntarily
disclosed
and
remediated
conducted
and
cooperated
with
the
DOJ
and
SEC
in
the
merger
and
acquisition
context.
International
Accounting &
Compliance

17. ANTI-BRIBERY PROVISIONS: PARENT SUBSIDIARY LIABILITY
A
Parent
may
be
liable
for
the
FCPA
violations
of
its
subsidiaries.
This
is
generally
in
one
of
two
ways:
• A
parent
has
participated
sufIiciently
in
the
activity
to
be
directly
liable
for
the
conduct
(ex:
the
parent
directed
or
supervised
the
activities).
•
A
parent
may
be
liable
under
traditional
agency
principles.
The
fundamental
agency
in
this
case
is
control.
In
the
case
of
agency,
the
DOJ
and
SEC
evaluate
the
parent’s
control,
including
the
parent’s
knowledge
and
direction
of
the
subsidiary’s
actions,
both
generally
and
in
the
context
of
a
speciIic
transaction.
Not
only
is
the
formal
relationship
between
the
parent
and
the
subsidiary
important
but
also
the
function
of
how
the
parent
and
subsidiary
interact
(function
over
form).
If
agency
exists,
then
a
subsidiary’s
actions
and
knowledge
are
imputed
to
its
parents.
Under
the
traditional
principles
of
respondeat
superior,
a
company
is
liable
for
the
acts
of
its
agents,
including
its
employees,
undertaken
within
the
scope
of
their
employment
and
intended
to
at
least
beneIit
the
Company.
International
Accounting &
Compliance

18. FCPA ANTI-BRIBERY PROVISIONS: EXCEPTIONS
The
FCPA
contains
an
explicit
exception
for
certain
types
of
payments,
referred
to
as
“facilitating
or
expediting
payments”
which
are
made
to
expedite
or
secure
performance
of
a
routine
governmental
action
by
a
foreign
ofIicial,
political
party,
or
party
ofIicial
that
relates
to
the
performance
of
non-­‐discretionary
acts.
Examples
of
this
are
payments
to
process
visas,
permits/licenses
to
do
business
in
a
foreign
country,
governmental
papers,
provide
police
protection,
provide
mail
service,
expedite
supply
of
utilities
such
as
water,
sewer,
electrical.
SpeciIically
excluded
from
this
are
any
payments
made
which
includes
a
decision
to
aware
new
business
or
retain
current
business.
This
allows
companies
to
avoid
liability
where
small
amounts
are
paid
to
expedite
certain
non-­‐discretionary
government
acts.
Warning:
This
exception
is
narrowly
construed
and
facts
and
circumstances
may
determine
that
due
to
size,
intent,
or
other
circumstances
a
facilitating
payment
may
still
be
deemed
a
violation.
The
payor
(or
beneIiciary
in
the
case
of
third
party
payments)
has
the
burden
of
proof
to
establish
that
the
exception
applies.
Careful
consideration
should
be
made
prior
to
making
these
types
of
payments.
International
Accounting &
Compliance

19. FCPA ANTI-BRIBERY PROVISIONS: PENALTIES
Penalties
for
violations
of
the
Act
are
severe
and
in
most
cases
range
from
the
millions
of
dollars
to
the
hundreds
of
millions
of
dollars.
Each
violation
of
the
anti-­‐bribery
provisions
can
carry
penalties
of
up
to:
•
Corporations
and
other
business
entities:
are
subject
to
a
Iine
of
up
to
$2
million
•
Individuals,
including
ofIicers,
directors,
stockholders,
and
agents
of
companies:
subject
to
a
Iine
of
up
to
$100,000
and
imprisonment
for
up
to
Iive
years.
This
means
that
a
company
with
50
violations
of
the
anti-­‐bribery
provisions
(i.e.
50
separate
corrupt
payments)
the
penalties
could
be
as
high
as
$100
million.
International
Accounting &
Compliance

20. ANTI-BRIBERY PROVISIONS: AFFIRMATIVE DEFENSES
The
FCPA
provides
two
afIirmative
defenses
to
the
anti-­‐bribery
provisions.
They
are
as
follows:
• The
payment
was
lawful
under
the
written
laws
and
regulations
of
the
foreign
country.
•
The
payment
was
a
reasonable
and
bona-­‐Iide
expenditure
related
to
product
promotion
or
performance
of
a
government
contract.
In
order
to
establish
this
defense,
the
defendant
must
show
that
the
bona
Iide
expenditures
lack
a
corrupt
purpose.
Examples
of
the
second
defense
may
be
bona-­‐Iide
travel
expenses
for
a
foreign
government
ofIicial
to
tour
your
plant,
meet
with
engineers,
and
see
the
product
testing
environment.
Every
component
of
the
trip
as
paid
for
by
the
Company
would
need
to
be
substantiated,
so
a
company
paid
“side
trip”
to
Las
Vegas
or
New
York
with
no
business
purpose,
or
exorbitant
expenses
such
as
luxurious
accommodations,
limos,
$10,000
dinners,
etc.
would
be
a
violation.
International
Accounting &
Compliance

21. ACCOUNTING PROVISIONS
The
FCPA
accounting
provisions
are
primarily
related
to
books
and
records
and
internal
controls.
They
are
as
follows:
•
•
Books
and
records:
Issuers
must
make
and
keep
books,
records,
and
accounts
that,
in
reasonable
detail,
accurately
and
fairly
reIlect
and
issuer’s
transactions
and
dispositions
of
and
issuers
assets.
Internal
Controls:
Issuers
must
devise
and
maintain
a
system
of
internal
controls
sufIicient
to
assure
management’s
control,
authority,
and
responsibility
of
the
Iirm’s
assets.
The
accounting
provisions
are
primarily
designed
to
prevent
publicly
traded
companies
from
disguising
bribes
as
legitimate
commercial
transactions.
The
accounting
provisions
are
more
limited
in
scope
than
the
anti-­‐bribery
provisions
as
they
only
apply
to
issuers
(as
de:ined
previously).
However,
the
accounting
provisions
apply
regardless
of
whether
the
issuer
engages
in
foreign
activities.
International
Accounting &
Compliance

22. ACCOUNTING PROVISIONS: BOOKS AND RECORDS
Because
bribes,
both
foreign
and
domestic,
are
often
mischaracterized
in
an
issuer’s
books
and
records
the
FCPA
requires
that
issuers
must
make
and
keep
books,
records,
and
accounts
that,
in
reasonable
detail,
accurately
and
fairly
reIlect
and
issuer’s
transactions
and
dispositions
of
an
issuer’s
assets.
This
requirement
is
designed
to
prevent
the
following:
•
The
failure
to
record
the
improper
transactions.
•
The
alteration
of
records
to
conceal
the
improper
transactions.
•
The
creation
of
records
that
are
for
the
most
part
correct
(i.e.
income
and
expense
is
correctly
reported),
but
fails
to
adequately
describe
the
aspects
of
a
potential
corrupt
payment.
The
term
“reasonable
detail”
is
deIined
in
the
statute
as
the
level
of
detail
that
would
“satisfy
prudent
ofIicials
in
the
conduct
of
their
own
affairs,”
which
means
that
a
number
of
factors
must
be
weighted
that
are
relevant
to
a
speciIic
transaction(s),
and
also
taking
into
account
the
costs
of
compliance.
The
SEC
which
has
rulemaking
authority
over
the
accounting
provisions
has
also
adopted
two
regulations
enforcing
these
provisions.
Rule
13b2-­‐1
makes
it
unlawful
to
falsify
accounts,
providing
that
no
person
shall,
directly
or
indirectly,
falsify
of
cause
to
be
falsiIied,
any
book,
record
or
account
which
is
required
to
be
kept
under
the
act.
Additionally,
Rule
13b2-­‐2
makes
it
unlawful
to
supply
false
information
to
auditors.
International
Accounting &
Compliance

23. ACCOUNTING PROVISIONS: INTERNAL CONTROLS
Issuers
must
adopt
a
system
of
internal
account
controls
to
provide
reasonable
assurance
that:
• Transactions
are
executed
in
accordance
with
management’s
general
or
speciIic
authorization;
•
Transactions
are
recorded
as
necessary
to
(i)
permit
preparation
of
Iinancial
statements
in
conformity
with
generally
accepted
accounting
principles
or
any
other
criteria
applicable
to
such
statements,
and
(ii)
to
maintain
accountability
for
assets;
•
Access
to
assets
is
permitted
only
in
accordance
with
management’s
general
or
speciIic
authorization;
and
•
The
recorded
accountability
for
assets
is
compared
with
the
existing
assets
at
reasonable
intervals
and
appropriate
action
is
taken
with
respect
to
any
differences…
The
act
deIines
“reasonable
assurances”
as
such
level
of
detail
and
degree
of
assurance
as
would
satisfy
prudent
ofIicials
in
the
conduct
of
their
own
affairs.
There
is
no
proscribed
set
of
controls
as
each
company
operates
differently
and
has
particular
set
of
needs
and
circumstances,
a
robust
and
reasonable
set
of
internal
controls
is
necessary
to
help
prevent
FCPA
violations
for
all
companies
doing
business
internationally.
The
FCPA
requires
that
a
company
make
a
good-­‐faith
effort
to
ensure
that
any
company,
including
joint
ventures,
in
which
the
U.S.
company
or
one
of
its
subsidiaries
holds
50
percent
or
less
of
the
voting
power
comply
with
the
FCPA
accounting
provisions.
International
Accounting &
Compliance

24. ACCOUNTING PROVISIONS: PENALTIES
Individuals
and
companies
are
subject
to
criminal
and
civil
penalties
for
violating
the
FCPA’s
accounting
and
control
provisions.
•
Civil
liability:
The
SEC
can
seek
civil
penalties
of
up
to
$500,000
for
covered
entities
and
$100,000
for
individuals
per
violation.
•
Criminal
liability:
In
criminal
cases,
a
willful
violation
of
the
accounting
and
controls
provision
is
punishable
by
a
Iine
of
up
to
$25
million
against
entities,
and
a
Iine
of
up
to
$5
million
and
imprisonment
for
up
to
20
years
for
individuals.
An
individual
may
be
held
criminally
liable
for
“knowingly”
falsifying
any
book,
record,
or
account,
or
circumventing
or
failing
to
implement
a
system
of
internal
controls.
“Knowing”
in
this
context
may
include
willful
blindness
or
conscious
attempts
not
to
know.
Important:
the
accounting
provisions
do
not
contain
a
materiality
standard
and
no
proof
of
knowledge
or
intent
is
required
to
establish
a
civil
violation.
International
Accounting &
Compliance

25. ENFORCEMENT EXAMPLES
Below
are
some
relevant
examples
of
recent
FCPA
enforcement
actions
and
penalties:
•
•
•
•
•
•
•
Total
S.A.
-­‐
SEC
charged
the
France-­‐based
oil
and
gas
company
for
paying
bribes
to
intermediaries
of
an
Iranian
government
ofIicial
who
then
exercised
his
inIluence
to
help
the
company
obtain
valuable
contracts
to
develop
oil
and
gas
Iields.
Total
agreed
to
pay
$398
million
to
settle
SEC
and
criminal
charges.
(5/29/13)
Parker
Drilling
Company
-­‐
SEC
charged
the
worldwide
drilling
services
and
project
management
Iirm
with
violating
the
FCPA
by
authorizing
improper
payments
to
a
third-­‐party
intermediary
in
order
to
entertain
Nigerian
ofIicials
involved
in
resolving
the
company's
customs
disputes.
Parker
Drilling
agreed
to
pay
$4
million
to
settle
the
SEC's
charges.
(4/16/13)
Koninklijke
Phillips
Electronics
-­‐
SEC
charged
the
Netherlands-­‐based
health
care
company
with
FCPA
violations
related
to
improper
payments
made
by
employees
at
its
Polish
subsidiary
to
health
care
ofIicials
in
Poland.
Philips
agreed
to
pay
more
than
$4.5
million
to
settle
the
charges.
(4/5/13)
Eli
Lilly
and
Company
-­‐
SEC
charged
the
Indianapolis-­‐based
pharmaceutical
company
for
improper
payments
its
subsidiaries
made
to
foreign
government
ofIicials
to
win
business
in
Russia,
Brazil,
China,
and
Poland.
Lilly
agreed
to
pay
more
than
$29
million
to
settle
the
charges.
(12/20/12)
Garth
R.
Peterson
-­‐
SEC
charged
Garth
R.
Peterson
with
secretly
acquiring
millions
of
dollars
worth
of
real
estate
investments
for
himself
and
an
inIluential
Chinese
ofIicial
who
in
turn
steered
business
to
Morgan
Stanley's
funds.
He
agreed
to
a
settlement
in
which
he
is
permanently
barred
from
the
securities
industry
and
must
pay
more
than
$250,000
in
disgorgement
and
relinquish
his
approximately
$3.4
million
interest
in
Shanghai
real
estate
acquired
in
his
scheme.
(4/25/12)
Smith
&
Nephew
-­‐
SEC
charged
the
London-­‐based
medical
device
company
with
violating
the
FCPA
when
its
U.S.
and
German
subsidiaries
bribed
public
doctors
in
Greece
for
more
than
a
decade
to
win
business.
The
company
and
its
U.S.
subsidiary
agreed
to
pay
more
than
$22
million
to
settle
civil
and
criminal
cases.
(2/6/12)
Magyar
Telekom
-­‐
SEC
charged
the
largest
telecommunications
provider
in
Hungary
and
three
of
its
former
top
executives
with
bribing
government
and
political
party
ofIicials
in
Macedonia
and
Montenegro.
The
Iirm
and
its
parent
company
agreed
to
pay
$95
million
to
settle
civil
and
criminal
charges.
(12/29/11
International
Accounting &
Compliance

26. ENFORCEMENT EXAMPLES (Cont.)
Below
are
some
relevant
examples
of
recent
FCPA
enforcement
actions
and
penalties:
•
Watts
Water
Technologies
and
Leesen
Chang
-­‐
SEC
charged
the
company
and
a
former
vice
president
of
sales
for
improper
payments
disguised
as
sales
commissions
by
its
Chinese
subsidiary
to
employees
at
state-­‐owned
design
institutes
in
order
to
inIluence
design
speciIications
that
favored
their
valve
products
for
infrastructure
products
in
China.
(10/13/11)
•
Armor
Holdings
-­‐
SEC
charged
the
Jacksonville,
Fla.-­‐based
body
armor
supplier
for
illicit
payments
to
United
Nations
ofIicials
to
obtain
contracts
related
to
U.N.
peacekeeping
missions.
Armor
Holdings
agreed
to
an
SEC
settlement
of
$5.7
million
and
a
criminal
Iine
of
$10.29
million.
(7/13/11)
•
Data
Systems
&
Solutions
LLC
–
The
DOJ
charged
the
Reston,
Va.
based
nuclear
facility
design,
installation,
maintenance
and
other
service
provider
for
paying
bribes
to
ofIicials
employed
by
the
Ignalina
Nuclear
Power
Plant,
a
state-­‐owned
nuclear
power
plant
in
Lithuania.
Data
Systems
entered
into
a
deferred
prosecution
and
paid
a
$8.82
million
criminal
penalty.
(06/18/2012)
•
Biomet,
Inc.
–
The
DOJ
charged
the
Indiana
based
medical
device
company
for
making
various
improper
payments
to
publicly
employed
healthcare
providers
in
Argentina,
Brazil
and
China
to
secure
lucrative
business
in
hospitals.
The
Company
entered
into
a
deferred
prosecution
agreement
and
paid
a
$17.28
million
criminal
penalty.
(03/26/2012)
•
Marubeni
Corporation
–
The
DOJ
charged
the
Tokyo
based
trading
company
with
conspiracy
and
aiding
and
abetting
violations
of
the
FCPA
in
a
scheme
to
bribe
Nigerian
government
ofIicials
to
obtain
contracts.
Under
the
terms
of
a
deferred
prosecution
agreement
the
Company
paid
$54.6
million
criminal
penalty
and
$1.7
billion
in
total
penalties
for
all
members
of
the
joint
venture
(Halliburton
$579
million,
Technip
$338
million,
Snamprognett
$365
million,
JGC
$218.8
million).
(01/17/2012)
International
Accounting &
Compliance

27. GRAY’S FCPA SOLUTIONS
Gray
believes
that
the
FCPA
is
the
single
most
important
compliance
issue
for
companies
doing
business
internationally.
The
Law’s
broad
reach
can
apply
to
businesses
and
individuals
that
never
thought
that
they
would
be
subject
to
its
provisions.
With
civil
and
criminal
penalties
in
the
tens
to
hundreds
of
millions
of
dollars
and
the
potential
of
jail
time,
no
compliance
problem
needs
addressing
as
urgently
by
international
organizations
than
the
FCPA.
Single
violations
can
put
small
to
medium
size
companies
out
of
business,
multiple
violations
result
in
insolvency
for
even
large
companies.
To
help
you
navigate
implications
of
the
FCPA
for
your
business,
Gray
provides
a
broad
range
of
FCPA
compliance
solutions
tailored
to
your
organization
and
operating
environment.
With
a
deep
expertise
of
operating
and
auditing
in
the
emerging
markets
Gray
is
uniquely
position
to
provide
world
class
services
to
your
organization:
INTERNAL
CONTROL
DESIGN
ANTI-­‐CORRUPTION
PROGRAMS
IMPLEMENTATION
THIRD
PARTY
MONITORING
FCPA
INVESTIGATIONS
International
Accounting &
Compliance

28. CONTACT US
Gray
welcomes
your
questions,
comments
and
inquiries
and
would
like
the
opportunity
to
serve
you.
Addresses
U.S.
International
OfIice
Attn:
Jeremy
Stobie,
CPA,
CFE
10900
NE
8th
Street
Suite
1000
Bellevue,
WA
98004
Phone
+
001
425.999.3685
xt
10
Website
www.grayintl.com
E-mail
info@grayintl.com
International
Accounting &
Compliance