F.   Internal Controls & Recordkeeping:

The FCPA accounting provisions have two components.  First, the FCPA requires issuers (see below) to make and keep books and records in “reasonable detail” to “accurately and fairly reflect” transactions and disbursements of the issuers’ assets.  The SEC’s enforcement policy is to treat any illicit payment as material, per se, that is, no other information regarding the payment is relevant to the question of whether it must be recorded.  Second, the FCPA requires issuers to devise and maintain a system of internal accounting controls that, among other things, "provide reasonable assurances that transactions are executed in accordance with the management's     authorization." In short, the controls must be adequate to protect against off-book accounts and disbursements and other unauthorized payments.  The FCPA requires "reasonable" rather than absolute assurance that accounting controls are adequate.

The U.S. Foreign Corrupt Practices Act (FCPA) accounting and recordkeeping provisions directly apply to all “issuers.”  “Issuers” are defined to include any company that is registered on any U.S. securities exchange and is required to file reports with the SEC, whether or not the company is a U.S. or a foreign company.   In addition, the FCPA requires issuers to ensure that all of their majority-owned (50% or more) affiliates comply with the accounting requirements.  “Issuers” also are required to use best efforts in good faith to ensure that their minority-owned (less than 50%) affiliates also comply.  The accounting provisions apply without regard to the existence or extent of a company's foreign operations.

Like the antibribery provisions, the accounting and internal control requirements of the FCPA are enforced by the Department of Justice and the SEC.  Generally, the SEC polices inadvertent or negligent violations, and refers willful violations to the Department of Justice for prosecution.

The SEC may impose civil penalties under its general enforcement authority over all reporting companies.  Under this authority, the SEC may impose civil fines, bring an injunctive action or enter a cease-and-desist order against a person who violates, or is about to violate, the antibribery provisions, and/or order disgorgement of ill-gotten gains.

The Department of Justice has enforcement authority over criminal violations of the accounting rules. Persons may be criminally liable under the accounting rules if they “knowingly circumvent or knowingly fail to implement a system of internal accounting controls or knowingly falsify any book, record, or account” required to be maintained under the FCPA.  The penalties for such violations are the same penalties applicable to other criminal violations of the securities laws.  Under those laws, individuals found to have committed a “willful” violation may be fined up to $1 million and/or imprisoned up to ten years; enterprises found to have “willfully” violated the accounting requirements may be fined up to $2.5 million.