One of the more confusing areas of the FCPA is in that of facilitation payments. Facilitation payments are small bribes but make no mistake about it, they are bribes. For that reason, many companies feel they are inconsistent with a company culture of doing business ethically and in compliance with laws prohibiting corruption and bribery. Further, the 2020 FCPA Resource Guide, 2^nd edition specifies, “while the payment may qualify as an exception to the FCPA’s anti-bribery provisions, it may violate other laws, both in Foreign Country and elsewhere. In addition, if the payment is not accurately recorded, it could violate the FCPA’s books and records provision.” Additionally, the 2012 FCPA Resource Guide states, “Whether a payment falls within the exception is not dependent on the size of the payment, though size can be telling, as a large payment is more suggestive of corrupt intent to influence a non-routine governmental action. But, like the FCPA’s anti-bribery provisions more generally, the facilitating payments exception focuses on the purpose of the payment rather than its value.”

In addition to these clear statements about whether the FCPA should continue to allow said bribes; you should also consider the administrative nightmare for any international company. The U.K. Bribery Act does not have any such exception, exemption or defense along the lines of the FCPA facilitation payment exception. This means that even if your company allows facilitation payments, it must exempt out every U.K. Company or subsidiary from the policy. Further, if your company employs any U.K. citizens, they are subject to the U.K. Bribery Act no matter who they work for and where they may work in the world, so they must also be exempted. Finally, if your U.S. Company does business with a U.K. or other company subject to the U.K. Bribery Act, you may be prevented contractually from making facilitation payments while working under that customer’s contract. As I said, an administrative nightmare.

Interestingly, one of the clearest statements about facilitation payments comes not from a FCPA case about facilitation payments but the case of US v. Kay, 359 F.3d 738 (5th Cir. 2004). This case dealt with whether payment of bribes to obtain a favorable tax ruling was prohibited under the FCPA. In its opinion, the Fifth Circuit commented on the limited nature of the facilitating payments exception when it said:

A brief review of the types of routine governmental actions enumerated by Congress shows how limited Congress wanted to make the grease exceptions. Routine governmental action, for instance, includes “obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country,” and “scheduling inspections associated with contract performance or inspections related to transit of goods across country.” Therefore, routine governmental action does not include the issuance of every official document or every inspection, but only (1) documentation that qualifies a party to do business and (2) scheduling an inspection—very narrow categories of largely non-discretionary, ministerial activities performed by mid- or low-level foreign functionaries.

Helmerich and Payne. In 2009, Helmerich and Payne, Inc., paid a penalty and disgorgement fee of $1.3 million for payments which were made to secure customs clearances in Argentina and Venezuela, receiving a NPA from the DOJ. The payments ranged from $2,000 to $5,000 but were not properly recorded and were made to import/export goods that were not within the respective country’s regulations; to import goods that could not lawfully be imported; and to evade higher duties and taxes on the goods

Panalpina. Finally, there is the Panalpina enforcement action. This matter was partly resolved with the payments by Panalpina and six of its customers of over $257 million in fines and penalties. Panalpina, acting as freight forwarder for its customers, made payments to circumvent import laws, reduce customs duties and tax assessments and to obtain preferential treatment for importing certain equipment into various countries but primarily in West Africa. Panalpina received a DPA.

From the information provided by the DOJ in Opinion Releases and in enforcement actions, there are several different insights which may be drawn on regarding what should go into your policy on facilitation payments:

1. Size of payment – Is there an outer limit? No, there is no outer limit but there is some line where the perception shifts. If a facilitating payment is over $100 you are arguing from a point of weakness. The presumption of good faith is against you. You might be able to persuade the government at an amount under $100. But anything over this amount and the government may well make further inquiries. So, for instance, the DOJ might say that all facilitation payments should be accumulated together and this would be a pattern and practice of bribery.
2. What is a routine governmental action? Is the company entitled to this action, has it met all of requirements to obtain the requested permit, license or action or is it asking the government official to look the other way on some requirement? Is the company asking the government official to give us a break? The key question here is whether you are entitled to the action otherwise.
3. Does the seniority of the governmental official matter? This is significant because it changes the presumption of whether something is truly discretionary. The higher the level of the governmental official involved, the greater chance his decision is discretionary.
4. Does the action have to be non-discretionary? Yes, because if it is discretionary, then a payment made will appear to be obtaining some advantage that is not available to others.
5. What approvals should be required? A facilitation payment is something that must be done with an appropriate process. The process should have thought and the decision made by people who are the experts within the company on such matters.
6. Risk of facilitation payments and third parties? Whatever policy you have, it must be carried over to third parties acting on your behalf or at your direction. If a third-party cannot control this issue, the better compliance practice would be to end the business relationship.
7. How should facilitation payments be recorded? Facilitation payments must be recorded accurately. You should have a category entitled “Facilitation Payments” in your company’s internal accounting system. The labeling should be quite clear and they are critical to any audit trail so recording them is quite significant.
8. Monitoring programs? There must always be ongoing monitoring programs to review your company’s internal controls, policies and procedures regarding facilitation payments.

Also remember that the defense of facilitation payments is an exception to the FCPA prohibition against bribery. Any defendant which wishes to avail itself of this exception at trial would have to proffer credible evidence to support its position, but at the end of the day, it would be the trier of fact which would decide. So much like any compliance defense, the exception is only available if you use it at trial and it would be difficult to imagine that any company would want such a matter to ever see the light of a courtroom.

After answering the above questions and your organization decides it desires to allow facilitation payments, you should draft a policy that permits the company to make Facilitating Payments with 1) prior approval of the compliance department, 2) prior approval from company management, and 3) proper financial recording. It may be difficult to distinguish a legal facilitation payment from a request that could be viewed as an illegal bribe or kickback; therefore, facilitating payments should be strictly controlled, and every effort should be made to eliminate or minimize such facilitating payments.

Do not forget that facilitation payments must be accurately shown on the books and records of your company. In all cases the employee who requested permission to make the facilitation payment must be responsible for obtaining all required approvals and forwarding a copy of the approvals and any other relevant supporting documentation as required, so that the it is recorded as a facilitation expense in the books and records and maintained in a central file. Facilitation payments should not be recorded as consulting fees, entertainment expenses, or other types of expenses that may misrepresent the true nature of the payments.

There may be emergency situations when it will be difficult or impossible for employees to obtain approvals before having to decide whether or not to pay a facilitation payment. If the facilitation payment is made in an emergency, the employee reports the facilitating payment to the compliance department and explains the emergency as soon as practical after making the facilitation payment.

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