The Foreign Corrupt Practices Act (FCPA) is a federal law that 1) forbids bribery of foreign government officials and 2) requires accurate financial record keeping for publicly traded companies.
1) Anti-bribery - The FCPA provides for rewards to whistleblowers who provide original information about bribes paid to foreign government officials by U.S. persons or publicly-traded companies. This includes information about individuals aiding and abetting violations, or conspiring to violate the FCPA. Generally, bribery is defined as paying, or promising to pay, anything of value to a foreign official to induce the official to misuse his or her official position or to secure any other improper advantage in order to obtain or retain business. Foreign official covers all employees of a foreign government, including government agencies and institutions.
2) Record Keeping - Publicly traded companies must maintain a system of internal accounting controls (i.e. a method of keeping accurate financial books and record keeping) to ensure that financial misconduct does not take place. The goal is to prevent bribery and ensure that investors can rely on accurate "internal controls" (i.e. accurate financial books and records) for publicly traded companies. The law provides for sanctions for violations of bookkeeping requirements.
The FCPA establishes U.S. jurisdiction for bribes paid in foreign countries by foreign nationals to foreign government officials. This means that the FCPA is applicable even if bribes are paid in a foreign country and the whistleblower is a foreign national.
The FCPA is enforced by the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC). In addition, the SEC also offers whistleblower rewards to those who report violations. Whistleblowers who have witnessed a “securities law violation” get preferential treatment under U.S. law that allows them to report anonymously, be protected from retaliation and claim a whistleblower reward.
Securities law violations typically occur when a company engages in some form of fraud, but common examples of securities violations include:
Violations of the Foreign Corrupt Practices Act (FCPA);
Bribery or corruption;
Insider trading;
Accounting fraud;
Investor fraud;
Failure to keep accurate books and records;
Serious breach of internal controls;
Serious corporate governance failures; and
Revenue manipulation.
Certain U.S. laws provide protections for individuals who report FCPA violations to federal regulators like the SEC and DOJ. However, those protections do not apply if the person only reports to their employer. Similarly, if you report an FCPA violation to the SEC, you could be entitled to an SEC whistleblower reward, but reporting only to the DOJ may affect your ability to claim an award.
In regard to reporting violations to the SEC, as the SEC handles its own investigations and there is no need to file a lawsuit. When it comes to claiming a whistleblower reward, there are special rules for how to report if you are a lawyer, director, officer or work in the compliance or audit team. However, most employees and executives will qualify for the SEC whistleblower reward program provided they can provide “original information” about a securities law violation. In fact, the SEC whistleblower rewards program is not limited to employees, it is also open to people who work as contractors, consultants, sales agents, suppliers or other third parties in the supply chain.
To report, first, as required by the SEC, the whistleblower must hire a U.S.-licensed attorney. Second, the whistleblower must provide the attorney with his or her original information and must sign an official form from the SEC known as a “TCR” (Tip, Complaint or Referral). Third, the signed TCR is provided to the attorney, who must keep it in their files. Fourth, the attorney redacts all of the whistleblowers identifying information, and signs the TCR verifying the filing under oath. The attorney then files the TCR directly with the SEC. Thus, although the U.S. government is not provided with the name of the whistleblower, the whistleblower’s attorney can be held accountable for any misconduct by the attorney or whistleblower.
If the anonymous whistleblower’s information results in a successful enforcement action in which the SEC obtains a sanction of $1 million or more, the whistleblower is entitled to a reward between 10% and 30% of all sanctions obtained. However, in order to obtain the reward, the whistleblower is required to inform the SEC of their identity and submit an application for award. This notification is necessary to ensure that the whistleblower is not a “disqualified” person, such as an employee of the SEC. The SEC is still required to keep the whistleblower’s identity strictly confidential, and all rewards are paid on a confidential basis.
For more information read through the Department of Justice’s resource guide, which functions as an unofficial FCPA compliance manual for many compliance personnel.