Previous posts (see here, here and here) have posed the question several times.

Why do Foreign Corrupt Practices Act violations occur?

Do companies subject to the FCPA do business in foreign markets: (i) intent on engaging in bribery as a business strategy and without a committment to FCPA compliance; or (ii) with a committment to FCPA compliance, yet subject to difficult business conditions?

To be sure, there have been some instances, as reflected in FCPA enforcement actions, where bribery was used as a business strategy and approved of and condoned by high-level corporate executives.  However, the latter is the more common reason for FCPA enforcement actions and related scrutiny.

Indeed, as Joseph Covington (a former DOJ FCPA Unit Chief) commented in this prior guest post, he has “rarely seen American companies affirmatively offering bribes in the first instance.”  Rather, Covington observed that companies doing business in international markets are “reacting to a world not of their making” and that “as the world shrinks companies who seek to do the right thing can’t help but confront corrupt officials – as customers, regulator and adjudicators – and confront them often.”

This point is evident in reviewing the World Bank’s Ease of Doing Business Rankings and then comparing the results to Transparency International’s Corruption Perceptions Index.

The “ease of doing business index” ranks countries based on factors such as the ease of starting a business, obtaining permits and otherwise dealing with regulatory officials.  The “corruption perceptions index” ranks countries based on the perceived levels of public sector corruption. You don’t have to be trained in sophisticated statistical methods (which I am not) to see a positive correlation between the two rankings.  That is, the lower the regulatory burdens imposed on business, the less corrupt the country is perceived to be.  The greater the regulatory burdens imposed on business, the more corrupt the country is perceived to be.

Regulatory burdens (ranging from customs procedures, licensing and certification requirements, foreign government procurement policies, etc.) create bureaucracy, bureaucracy creates interactions with foreign officials, and the more interactions with foreign officials the greater the FCPA risk will be.

In short, in addition to the forced business relationships that many companies are required to endure while doing business in a foreign country, companies are often funneled into an arbitrary world of low-paying civil servants who administer entrenched bureaucracies which create the conditions for harassment bribes to flourish.

In “Revisiting a Foreign Corrupt Practices Act Compliance Defense” I argued that the U.S. ought to recognize this simple fact of doing business in many international markets.

Well, in fact, the U.S. Congress did recognize this fact when it passed the FCPA.  Congress exempted so-called “grease” or “facilitation” payments from the reach of the FCPA (first through the definition of “foreign official” and then in 1988 through a stand-alone facilitation payment exception) and otherwise included an obtain or retain business element in the FCPA’s anti-bribery provisions. (See my article “The Story of the Foreign Corrupt Practices Act” for a detailed overview of the legislative history).

I argued in “Revisiting an FCPA Compliance Defense” that, so long as the enforcement agencies refuse to recognize congressional intent in enacting the FCPA, that such congressional intent is best advanced through an FCPA compliance defense in which a company can assert, as a matter of law, that its pre-existing FCPA policies and procedures sought to prevent such payments in foreign markets.  As detailed in the article, this is not the only reason I, and many others, support an FCPA compliance defense, but it is clearly an important reason.

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The below chart has two segments.  The left segment lists the countries at the top of the “ease of doing business index” and a country’s associated “corruption perceptions index” score.  The right segment lists the countries at the bottom of the “ease of doing business index” and a country’s associated “corruption perceptions index” score.

Country

World Bank Doing Business Index

Transparency International CPI Index

Country

World Bank Doing Business Index

(out of 185)

Transparency International CPI Index

(out of 174)

Singapore

1

5

Senegal

166

94

Hong Kong

2

14

Mauritania

167

123

New Zealand

3

1

Afghanistan

168

174

United States

4

19

Timor-Leste

169

113

Denmark

5

1

Gabon

170

102

Norway

6

7

Djibouti

171

94

United Kingdom

7

17

Angola

172

157

Korea, Rep.

8

45

Zimbabwe

173

163

Georgia

9

51

Haiti

174

165

Australia

10

7

Benin

175

94

Finland

11

1

Niger

176

113

Malaysia

12

54

Cote d Ivoive

177

130

Sweden

13

4

Guinea

178

154

Iceland

14

11

Guinea-Bissau

179

150

Ireland

15

25

Venezuela

180

165

Taiwan

16

37

Congo, Dem. Rep.

181

160

Canada

17

9

Eritrea

182

150

Thailand

18

88

Congo Rep.

183

144

Mauritius

19

43

Chad

184

165

Germany

20

13

Central Africa Rep.

185

144