The Foreign Corrupt Practices Act (FCPA): A Controversial Law and Its Future Under Trump

Introduction: The FCPA and Its Role in Combating Global Corruption

The Foreign Corrupt Practices Act (FCPA), enacted in 1977, is a landmark U.S. law designed to combat global corruption by prohibiting American companies and individuals from making payments to foreign government officials to secure an improper advantage in business transactions. Over the decades, the FCPA has been hailed by supporters as a critical tool for promoting ethical business practices and ensuring a level playing field for U.S. companies operating abroad. However, critics argue that the law places American businesses at a competitive disadvantage, as foreign companies may resort to bribery to win contracts in countries where such practices are common. Recently, President Donald Trump has weighed in on the debate, signing an executive order that halts enforcement of the FCPA for 180 days while his administration reviews the law and considers new guidelines. This move has sparked intense discussion about the future of the FCPA and its impact on U.S. businesses and global corruption.

The Trump Administration’s Pause on FCPA Enforcement: A Strategic Move or a Step Backwards?

President Trump’s decision to pause enforcement of the FCPA has been met with both praise and criticism. During the signing of the executive order, Trump called the law "a disaster" in practice, claiming it hampers American companies’ ability to compete internationally. He emphasized that the pause is necessary to develop "reasonable" enforcement guidelines that do not put U.S. businesses at a disadvantage in foreign deals. The order not only halts all ongoing FCPA investigations but also prevents new ones from being initiated during the 180-day review period. Additionally, it suspends other Justice Department "actions" under the law, though it remains unclear whether this includes ongoing prosecutions.

Supporters of Trump’s move argue that the FCPA has been enforced in an "excessive and unpredictable" manner, creating an uneven playing field for U.S. companies. They contend that the law ties the hands of American businesses, preventing them from securing crucial deals that could grant access to critical resources such as deep water ports and minerals. On the other hand, critics warn that weakening the FCPA could undermine global efforts to combat corruption and damage the U.S.’s reputation as a leader in ethical business practices. Experts like Mark Pieth, a criminal law professor at the University of Basel and an anti-bribery law expert, fear that this move could lead to a "Wild West situation," where companies from various countries engage in unchecked corruption to gain a competitive edge.

The FCPA: A Historical Overview and Its Significance

The FCPA was enacted in the 1970s in response to widespread concerns about global corruption. Investigations by the U.S. Securities and Exchange Commission (SEC) revealed that hundreds of American companies had made questionable or illegal payments to foreign officials to secure business advantages. The law was designed to address these issues by making it illegal for U.S. companies and individuals to offer or pay bribes to foreign government officials "to secure any improper advantage" in business dealings. Importantly, the FCPA does not require that a bribe be actually paid; merely offering or promising a payment is sufficient to violate the law.

Over the years, the FCPA has led to numerous high-profile prosecutions, uncovering a wide range of corrupt practices. For example, in 2023, the military contractor RTX (formerly Raytheon) agreed to pay over $300 million to settle charges that it had bribed officials in Qatar using sham contracts and other deceptive tactics. In 2019, Walmart paid $282 million to resolve allegations that it had bribed local officials in Mexico, India, and Brazil to obtain approval to open stores. These cases highlight the FCPA’s role in holding companies accountable for unethical practices and deterring future corruption.

How the FCPA is Enforced and Its Impact on Businesses

The enforcement of the FCPA is a joint effort between two federal agencies: the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ). The SEC handles civil enforcement of the law, focusing on companies’ failure to maintain accurate records and internal controls, while the DOJ is responsible for both criminal and civil enforcement. Criminal cases under the FCPA carry severe penalties, including up to 20 years in prison for individuals and fines for companies that can amount to double the profits made from the illicit deal. Civil cases, on the other hand, have a lower burden of proof and typically result in financial settlements.

The FCPA’s importance extends beyond penalizing corrupt practices; it also promotes fair competition and protects U.S. businesses from the costs associated with global corruption. By requiring companies to maintain transparent records and internal controls, the law helps to ensure that businesses operate ethically and responsibly. However, critics argue that the FCPA’s stringent requirements and broad enforcement put U.S. companies at a disadvantage in countries where bribery is deeply ingrained in business culture. This criticism has been a recurring theme since the law’s enactment nearly 50 years ago.

Criticisms of the FCPA and the Debate Over Its Future

President Trump is not the first to criticize the FCPA for being overly burdensome. Since its inception, U.S. businesses have complained that the law’s stringent requirements and aggressive enforcement make it harder for them to compete in global markets. Critics argue that while the FCPA was groundbreaking in its time, it has become outdated in an era where many countries have adopted their own anti-bribery laws. Some point out that foreign companies may exploit the FCPA’s restrictions by engaging in corrupt practices themselves, knowing that U.S. firms are constrained by the law.

Moreover, Trump has argued that the FCPA’s enforcement is "draining resources" from law enforcement and harming U.S. national interests by restricting companies’ ability to secure deals that could provide access to critical assets. However, experts like Mark Pieth warn that weakening the FCPA could have far-reaching consequences. If the U.S. signals that it is relaxing its anti-bribery standards, other countries may follow suit, leading to a global race to the bottom in ethical business practices. This could result in a surge in corruption, undermine trust in international markets, and empower autocratic leaders who enrich themselves and their regimes through corrupt deals.

The Future of the FCPA and Its Global Implications

As the Trump administration reviews the FCPA and considers new enforcement guidelines, the stakes are high for U.S. businesses, global markets, and the fight against corruption. While some expect Trump to effectively cripple the law by refusing to enforce it, others hope that the pause will lead to reforms that balance the law’s anti-corruption goals with the need to support U.S. companies competing internationally.

Ultimately, the outcome of this debate will have significant implications for the future of global business and international relations. If the FCPA is weakened, it could embolden corrupt practices worldwide, undermine the U.S.’s leadership in promoting ethical business standards, and create a more uncertain and volatile environment for companies operating across borders. On the other hand, a more balanced approach to enforcement could help U.S. businesses compete more effectively without sacrificing the law’s core principles of integrity and fairness. As the world watches, the next steps taken by the Trump administration will shape the future of the FCPA and the global fight against corruption for years to come.