The End of the FCPA Facilitation Payment Exception?

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In November, 2009 OECD announced a new recommendation at the OECD’s celebration of “International Anti-Corruption Day” and the Tenth Anniversary of the “Entry into Force of the OECD Anti-Bribery Convention”. This change relates to facilitation payments (aka “grease payments”) which remain legal under the Foreign Corrupt Practices Act (FCPA).

OECD Secretary-General Angel Gurría described these low-level payments, designed to expedite performance of a “routine government action” such as obtaining mail delivery, phone or power service, as “corrosive . . . particularly on sustainable economic development and the rule of law”.

Facilitation payments, also known as “expediting payments” or “grease payments,” are bribes paid to induce foreign officials to perform routine functions they are otherwise obligated to perform. Examples of such routine functions include issuing licenses or permits and installing telephone lines and other basic services. The only countries that permit facilitation payments are the United States, Canada, Australia, New Zealand and South Korea. Facilitation payments, however, are illegal in every country in which they are paid. They have come under increasing fire under the FCPA as inconsistent with the totality of US policy on anticorruption.

This change by the OECD brings the considerable problems associated with facilitation in the international business arena into keener focus. Just like large commercial bribes, grease payments abuse the public trust and corrode corporate governance. Treating them as anything other than outright bribery muddies the compliance waters and adds confusion where there should be clarity. This new stance by the OECD, coupled with the passage of the UK Bribery Act which bans facilitation payments and increased enforcement under the FCPA, may well bode the end of facilitation payments.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Thomas Fox, Compliance Evangelist | Attorney Advertising

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