The Foreign Corrupt Practices Act (the “FCPA”) is the primary law used by the United States to combat global corruption and bribery. As anti-corruption efforts have intensified worldwide through the last two decades, the FCPA’s enforcement agencies, the Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”), have prioritized FCPA prosecutions. As part of these efforts, both agencies have signaled increasingly expansive interpretations of the FCPA’s jurisdictional reach, particularly over foreign individuals and companies. This Note examines the jurisdictional bounds of the FCPA by analyzing two areas where the DOJ and SEC have suggested expansive jurisdictional interpretations: correspondent account liability and parent-subsidiary liability.
Three hypothetical scenarios help exemplify the jurisdictional questions addressed in this Note. Consider which of these cases fall under the jurisdiction of the United States:
Alex is a U.S. citizen who lives in Nigeria and works for a Canadian-owned energy company. Alex is suspicious that the contract payments he has been approving as part of his regular business duties are being used in part to bribe Nigerian officials. He is not certain this is true and has been doing his best to stay out of it and avoid confirming his suspicions.
Beatrice is a British citizen employed by a Swiss company. She approved several transfers from a company account in Switzerland to a client account in Japan. Beatrice recently discovered that some of the money was used to purchase luxury cars for the Japanese officials who approved the client’s operational license. The transfers were made in U.S. dollars.
Caro is a Panamanian company wholly owned by a U.S. company, Clare. Clare has minimal oversight over Caro’s business and does not review, direct, or approve any of its day-to-day operations. Caro’s accounting team recently discovered that several members of its sales team have been bribing Brazilian officials to secure lucrative shipping contracts.
Which of these corrupt acts can be prosecuted in the United States? The answer, according to the DOJ and the SEC, appears to be all of them. Alex is a straightforward case: U.S. citizens are subject to the FCPA, regardless of where they act, by virtue of their citizenship. Beatrice and Caro, however, mirror examples of recent expansive jurisdictional statements by the DOJ and SEC in FCPA prosecutions. Acts as small as making a transfer in U.S. dollars between foreign accounts, as Beatrice did, may be enough to trigger prosecution. Foreign companies may be liable based solely on their relationship with a U.S. company, as could be the case for Caro. This expansion raises important questions for businesses worldwide seeking to understand what their potential exposure to FCPA liability may be and how to design adequate anti-corruption compliance programs.
This Note examines the legality and policy implications of two particularly amorphous jurisdictional bases, exemplified in the hypothetical scenarios: correspondent account liability (Beatrice) and parent-subsidiary liability (Caro and Clare). Part II details the history and development of the FCPA’s provisions and application, including the recent expansion in FCPA enforcement. Part III discusses the development of jurisdictional interpretations of the FCPA, looking particularly at the two jurisdictional bases in question: correspondent account and parent-subsidiary. Parts IV (correspondent account liability) and V (parent-subsidiary liability) analyze the legality and policy implications of recent applications of these jurisdictional bases in FCPA cases. The Note concludes that the DOJ and SEC are extending their jurisdictional reach too far. It proposes that a more effective FCPA strategy would result from a change in focus: instead of reaching everyone who may be reachable, agencies should strengthen collaboration with companies and foreign governments as they develop their own strategies to combat corruption.