Editor’s note: “International Business Corner” is a weekly column written by Joan Keston that provides information for people involved in or considering international operations. Keston is an international business consultant. Over the next several months she will be writing about important issues that international businesses face as they compete in the 21st century global business environment. This article is part of a series that addresses corruption.

RALEIGH – When doing business internationally, you must comply with the US anti-corruption legislation.

Although many US business people object to the far-reaching nature of the federal government’s enforcement of the US domestic laws into the domain of other sovereign nations, and the negative consequences affecting the ability of U.S. companies to compete internationally, anti-corruption and anti-bribery is a hot topic and primary focus in international politics. Corruption is viewed as an enormous obstacle to fair market principals and development in emerging markets.

Over the past several years the enforcement of the US anti-corruption legislation has increased in scope. You cannot do business internationally without having an awareness and working knowledge of this law.

Foreign Corrupt Practices Act of 1977

This act makes it unlawful:

• To offer, pay, promise to pay or authorize the payment of money or anything of value
• To a public official (or to any person knowing that any part of the payment will go to a public official)
• To induce the public official to use his/her influence
• To obtain or retain business, or to secure an improper (competitive) advantage.

What is a public official?

The definition of a public official includes all government employees, employees of a government-owned entity and employees of quasi-private entities. This is a critical factor in countries such as China where many businesses have a degree of governmental affiliation.

When is an official involved?

The involvement of an intermediary party through whom payment is made to a public official is prohibited. Therefore you cannot use a sales representative, distributor, consultant, investor, joint venture partner, purchaser of goods, regulatory official or other party to accomplish the prohibited action.

What if you don’t know that our intermediary is making a prohibited payment?

It is sufficient that you are aware of a high probability that such a payment will be made or of circumstances that lead you to be aware or believe that such a payment will be made. You cannot ignore indications that a prohibited payment is being made.

What type of payment is prohibited?

The giving of anything of value is prohibited, including money, special consideration, incentives/discounts, gifts, trips, entertainment, meals, favors of value. This includes any payments such as campaign contributions and payments made for lobbying services.

What type of payment is allowed?

The following types of payments to public officials are allowed:

• Payments that are legal as stated in the written laws of the country.

• Facilitating Payments, also called Grease Payments. An example is obtaining a license.

• Payments for reasonable, bona fide expenses incurred by or on behalf of a public official, directly related to the promotion or demonstration of the products or services, or execution or performance of contracts with the government. An example would be travel, lodging or entertainment expenses incurred for the activity described.

Can a public official work as a representative of my company?

A public official can work as an intermediary if they are not in the position to decide or influence the decision to retain or obtain business or secure an advantage over competitors.


There are two essential actions at a minimum that you must take to support your compliance efforts:

1. Know your foreign distributor, partner, sales rep, etc.

2. Implement educational and training guides for your domestic and foreign management teams.

(This article is not providing any legal advice regarding the subject discussed in this article. You should consult with legal counsel in that regard.)

About the Author: Joan Keston is the Managing Principal of Keston & Associates, Ltd., an international business consulting firm located in Raleigh, NC, and a Partner at Paladin and Associates, Inc. She has 25 twenty-five years of experience with mature as well as entrepreneurial companies, domestically and internationally, coupled with an executive managerial and legal background. Her firm facilitates international business transactions, and assists companies establish, grow and integrate their international operations. She can be reached at (919) 881-7764 and jkeston@kestonassociates.com.