Facilitation Payments: An Intractable Problem?

by Michael Volkov

facilpayment4It sounds easy on paper.  A company announces that it has banned all facilitation payments.  It is a worthy goal.  It sounds admirable.

The FCPA permits facilitation payments.  The UK Bribery Act prohibits facilitation payments.  International anti-corruption treaties also ban facilitation payments.

The enforcement of the UK Bribery Act remains a twisted mess while the SFO suffers from political oversight, scandals relating to departure/severance payments, and a constricted budget.  It is just not realistic to expect the SFO to launch any major enforcement actions.

It is hard to convince businesses to prohibit facilitation payments out of fear that the SFO will initiate an investigation and enforcement action against the company.  Right now, it is not even clear if the SFO has the resources to do much of anything in the global battle against corruption.

Companies, however, have a separate reason to prohibit all facilitation payments.  It is too difficult to define facilitation payments and to make it a workable policy.  Many companies have adopted a total ban, not out of fear of an enforcement action, but out of concern that employees and agents may end up making improper payments under the mistaken belief that the payments were permissible facilitation payments.facilpayment2

This is a serious risk.  Once you open Pandora’s Box to permissible facilitation payments, how does a CCO draw the line and enforce the line between permissible facilitation payments and illegal bribes?  The risk of missteps is too great, and it is especially dangerous to afford discretion to employees and agents to make such determinations.

Some may argue that policies can be designed and enforced to prevent facilitation payments from turning into illegal bribes but that is wishful thinking.

In many countries, government employees continue to demand facilitation payments for basic services.  Should a company take the risk and make such payments or should the company resist?  If the company decides to resist, how should the company do so without disrupting its business operations?

facilpayment3These are all difficult questions which many companies face.  For some companies, facilitation payments are an occasional annoyance, and require only minimal expenditures of money.  For other companies, facilitation payments are a regular part of business operations which can quickly add up to hundreds of millions of dollars each year.

For the CCO, depending on which camp your company falls, this may or may not be a high priority issue.  Companies which suffer from facilitation payment demands on a daily basis need to develop a solution with a corporate team consisting of senior management: compliance, operations, legal, financial and auditing representatives.

In the end, it is a battle to counter the internal forces fighting a total ban on facilitation payments.  However, enforcing the prohibition can reduce serious risks of bribery and save money which would otherwise be spent making facilitation payments.  It is a challenge but remember the old adage – nothing is easy in life.

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.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

Written by:

Michael Volkov

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