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Severity of US sanctions against foreign firms: evidence from the FCPA enforcements

Severity of US sanctions against foreign firms: evidence from the FCPA enforcements The purpose of this study is to examine whether foreign firms pay disproportionately higher monetary penalties after controlling for factors that affect the sanctioning of the firm.Design/methodology/approachIn this paper, a cross-sectional data analysis has been used to examine the enforcement actions of the Foreign Corrupt Practices Act (FCPA) against all private and public companies from 1978 to 2019.FindingsThe findings indicate that that foreign firms pay disproportionately higher monetary penalties than domestic firms after controlling for factors that affect the sanctioning of firms. On average, foreign firms pay $43.3m more to the US government than US firms pay. This is a considerable difference in monetary penalties and equal to 68.95% of the average monetary penalty.Originality/valueThis paper shows that the US government treats US firms more favorably than foreign firms in monetary sanctions. Because the FCPA is not applied equally, this is contrary to US government guidelines and to the rule of law. The government needs to reconsider the consequences of imposing disproportionately higher penalties on foreign firms. Given the lack of judicial scrutiny of the FCPA settlement amounts against foreign firms, prosecutorial harshness against them can be remedied by amending the FCPA to eliminate the unequal treatment of foreign entities. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Crime Emerald Publishing

Severity of US sanctions against foreign firms: evidence from the FCPA enforcements

Kuvvet, Emre
Journal of Financial Crime , Volume 30 (1): 16 – Jan 2, 2023
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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1359-0790
eISSN
1359-0790
DOI
10.1108/jfc-12-2021-0267
Publisher site
See Article on Publisher Site

Abstract

The purpose of this study is to examine whether foreign firms pay disproportionately higher monetary penalties after controlling for factors that affect the sanctioning of the firm.Design/methodology/approachIn this paper, a cross-sectional data analysis has been used to examine the enforcement actions of the Foreign Corrupt Practices Act (FCPA) against all private and public companies from 1978 to 2019.FindingsThe findings indicate that that foreign firms pay disproportionately higher monetary penalties than domestic firms after controlling for factors that affect the sanctioning of firms. On average, foreign firms pay $43.3m more to the US government than US firms pay. This is a considerable difference in monetary penalties and equal to 68.95% of the average monetary penalty.Originality/valueThis paper shows that the US government treats US firms more favorably than foreign firms in monetary sanctions. Because the FCPA is not applied equally, this is contrary to US government guidelines and to the rule of law. The government needs to reconsider the consequences of imposing disproportionately higher penalties on foreign firms. Given the lack of judicial scrutiny of the FCPA settlement amounts against foreign firms, prosecutorial harshness against them can be remedied by amending the FCPA to eliminate the unequal treatment of foreign entities.

Journal

Journal of Financial Crime – Emerald Publishing

Published: Jan 2, 2023

Keywords: Foreign firm; Monetary penalty; Government sanction; Corruption; Bribery; Foreign Corrupt Practices Act (FCPA); D73; F23; F51; G38; K22; K42; L51

References

  • The impact of the foreign corrupt practices act on US exports
    Beck, P.J.; Maher, M.W.; Tschoegl, A.E.
  • Crime and punishment: an economic approach
    Becker, G.S.
  • Policeman for the world: US enforcement of foreign corruption regulation and corporate investment policies
    Christensen, H.B.; Maffett, M.; Rauter, T.
  • Forbidden payment: foreign bribery and American business after 1977
    Hines, J.R.
  • Corporate reputation’s invisible hand: bribery, rational choice, and market penalties
    Sampath, V.S.; Gardberg, N.A.; Rahman, N.
  • A resource guide to the U.S. foreign corrupt practices act