The U.S. allows facilitating payments.
So does the OECD (see Andy Spalding’s post here).
The U.K. may not prosecute them, if the Guidance is any guide (see Bill Waite’s post here).
Companies say they can’t protect their people or property or do business in some places without them.
Others say they’re corrosive to those who pay them. And that they help perpetuate corrupt systems.
Do you support or oppose facilitating payments, and why?
Marc Alain Bohn
I typically advise companies to either prohibit or strictly curtail and control the use of facilitating payments as part of their corporate compliance programs. Such payments: (1) send mixed signals to local employees about the appropriateness of unreceipted payments; (2) are rarely legal under local law; and (3) continue to pose risk under U.S. law, inter alia, because of unsettled questions regarding their use. For instance, how large can facilitating payments permissibly be? For what purposes can they be used? Nevertheless, I think having a narrow facilitating payments exception in anti-corruption statutes has some value, as it provides companies which operate in challenging markets with a measure of reassurance that they will not be prosecuted for occasional small payments made to expedite non-discretionary decisions, as long as those payments are properly recorded. In today’s enforcement environment, the requirement that facilitating payments be transparently recorded on a company’s books serves as an important check on the facilitating payments exception, since it tends to discourage the use of such payments.
Facilitation payments, like all bribery and corrupt payments to high officials, should be phased out in international business. They are a thing of the past, opposed by evolving laws and business ethics and by companies that want the norms of true marketplace competition to prevail over petty shakedowns and solicitations.
For the sake of discussion, let’s take off the table the argument that facilitation payments must be preserved because they are needed for situations like obtaining police protection for an employee in danger. A company that bans or severely restricts facilitation payments — for example in response to an FCPA prosecution — can manage an emergency with special procedures designed for such purpose.
The norms of business and of law and corporate ethics have changed. Gone are the days when companies were forced to compete by who could pay the biggest bribe to the right fixer, versus who has the best products, quality, pricing or customer service.
Local customs are also changing, pushing back against facilitation payments. A popular web site, ipaidabribe encourages citizens of India to resist grease payments or to expose them.
Suppose perishable goods are stuck on the dock because the dock official suddenly demands a payoff to issue the import permit. Is the only choice to make the payoff or lose the goods? According to the International Chamber of Commerce, there are alternatives.
RESIST, an ICC initiative, collects dozens of examples from real-life situations of companies that anticipate the demand for a payoff but meet it with refusal and an action plan that employees are trained to execute. The program is a free download here. Tom Fox discussed training based on the RESIST case studies here.
The U.S. facilitating payment exception should be eliminated. Whether a company is making a grease payment in order to process a visa or bribing a high-level procurement official in order to obtain a large procurement contract, corruption is corruption. If the U.S. Government is against the bribery of foreign officials, it should be against all bribes made to all foreign officials–regardless of their status, level of discretion, or the good/service being procured. Besides, facilitating payments are a compliance nightmare–it is no wonder that most companies prohibit them. As the U.S. Government continues to demonstrate a decreasing tolerance for these types of payments, the elimination of the exception will, at a minimum, finally reflect the U.S. Government’s evolving position regarding these payments. Then it will be up to the Government to decide whether it wants to expend its finite resources prosecuting this form of corruption….
Michael Ndichu Kuria
From my perspective, facilitating payments provide an incentive for public officials to create more red tape and invent inefficiencies. In any case, the academic difference between facilitating payments and classical bribes are totally lost on public officials who consider them bribes. These payments therefore create an illegitimate expectation in public officials for additional payment to do what they are employed to do.
While the FCPA may consider facilitating payments legal, companies must be alive to the fact that they are illegal in many third world countries. It is illegal to make any payments to a public officer in Kenya, South Africa, as well as many other African countries. There are serious consequences for companies that make these payments without first considering the legal environment in the countries they operate in. It must not be lost on them that the FCPA is not domestic legislation in countries outside the U.S.
PS — I’m having a great time in Nairobi. It’s actually winter in the southern hemisphere. At an average temperature of 12°C, it is supposed to be very cold.
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