The Foreign Corrupt Practices Act and the United States’ quest for competitiveness in corrupt practices.

The Foreign Corrupt Practices Act (FCPA) is a pertinent United States law, enacted in 1977, that sought to combat rampant corporate corruption, particularly the bribery of foreign officials—a practice that was alarmingly prevalent at the time. The FCPA makes it unequivocally illegal to offer, promise, or provide anything of value to foreign officials with the intent of influencing them to obtain or retain business or another advantage. It also mandates the maintenance of accurate and detailed books and records to thwart any illegal activities.

The FCPA has played an important role in shaping robust corporate ethical standards and a valuable culture of compliance among transnational corporations, particularly those operating under its jurisdiction. Its influence has extended globally, establishing a benchmark for most corporations’ anti-bribery and corruption policies. Today, the FCPA stands as a gold standard of anti-corruption legislation, promoting integrity in corporate practices around the world. Many national anti-corruption laws with an international focus are designed to reflect the rigorous standards set by the FCPA.

However, the recent Executive Order issued by President Donald Trump, which halts the enforcement of the FCPA, marks a troubling shift in the ongoing battle against international corporate corruption—an unexpected and alarming development for compliance professionals across the globe. The rationale behind President Trump’s decision is rooted in a desire to enhance American competitiveness and security, based on several key arguments:

1. The over-enforcement of the FCPA is detrimental to U.S. companies, preventing them from engaging in practices that are routine for their international counterparts and creating an uneven competitive landscape.
2. Securing strategic advantages related to critical minerals, deep-water ports, and essential global assets is imperative for American national security.
3. The FCPA’s enforcement challenges the President’s Article II authority to conduct foreign affairs, necessitating a critical re-evaluation of enforcement strategies.
4. The interpretation and application of the FCPA by U.S. prosecutors have expanded beyond reasonable bounds, burdening the U.S. economy with mounting costs.
5. The enforcement of the FCPA diverts vital resources from both American businesses and law enforcement.

While these justifications may resonate with some, they raise pressing ethical concerns: Should ethical business practices be compromised in the name of competitiveness? Is engaging in bribery to secure contracts a legitimate measure of corporate competitiveness? Does the refusal to engage in corrupt practices signify a failure to compete effectively? Are companies that profit from corrupt dealings truly competitive, or are they undermining the very principles of fairness and integrity?

To substantiate their claims, the Trump administration must provide clear parameters for measuring competitiveness, along with data that will help compliance professionals draw informed conclusions. Without such transparency, it may appear that the United States is prioritizing competitive advantage in corruption, potentially leading to disheartening ratings on Transparency International’s corruption perception index. This misguided strategy risks cementing a reputation for corruption that could tarnish the integrity of American businesses on a global scale.

Moreover, this executive order has a significant and concerning implication: companies associated with the U.S. will be at liberty to conduct business like their international counterparts, disregarding the FCPA’s foundational principles. The deterrent effect that has historically governed American companies operating abroad will be significantly diminished as fears of enforcement take a back seat to newfound competitive freedoms.

Significantly, the United States government has quite literally banked on the enforcement of the FCPA, deriving substantial revenue from settlements, penalties, and disgorgements. This financial incentive has historically upheld a competitive advantage for the U.S. However, as the country pivots towards unrestrained competitiveness, it risks relinquishing this unique position and the moral high ground in the global fight against corruption.

Key Implications of the Executive Order

1. Companies that are connected to the FCPA will now enjoy freedom to operate similarly to their foreign counterparts, even when doing so contradicts FCPA principles.
2. American firms may escalate their roles in the supply chain of bribery and corruption, thereby potentially worsening the national corruption perception index.
3. The cessation of revenues generated from FCPA enforcement globally will undermine the United States’ position as a leader in combating corrupt practices on the world stage.