U.S. Businesses, China and the Foreign Corrupt Practices Act

The 1988 Trade Act by the United States Congress directed the U.S. Attorney General to provide guidance to potential exporters and small business regarding the Foreign Corrupt Practices Act of 1977, an act all U.S. businesses operating in China need to be familiar with.

The FCPA prohibits the "corrupt" payment of money or bribes to foreign officials for the purpose of keeping or maintaining business. The FCPA also links in with several other U.S. acts, providing for federal prosecution of violations of state commercial bribery statutes. The FCPA requires U.S. listed companies to meet their accounting provisions, which are designed to operate in parallel with the anti-bribery provisions of the FCPA and require corporations to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls.

The basic requirements of the FCPA are fairly straightforward. Rather, it is the cultural traditions and the common business practices that lend a layer of complexity to enforcement of the FCPA with respect to business done in the People's Republic of China. While some business practices may be considered entirely acceptable, or even expected, in the course of doing business in China, these practices can often be a violation of the FCPA and are subject to steep fines and jail time in the United States. Companies subject to the FCPA may find themselves faced with making the decision between losing business and violating the FCPA. Violators face the prospect of criminal sanctions, civil sanctions, and injunctions. Criminal sanctions against corporations and other entities can exceed fines of one million dollars. Sanctions against individuals may reach five years in prison and fines of one hundred thousand dollar.

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Dezan Shira & Associates is a fully licensed accounting practice in China and offers business advisory, tax accounting, due diligence, payroll and audit services for multinational clients in China, Hong Kong, Vietnam and India. For inquiries or more information, please contact info@dezshira.com or visit www.dezshira.com.