The Foreign Corrupt Practices Act (FCPA) works through two doors. One door punishes bribery: paying, or offering to pay, a foreign government official to win or keep business. The other door punishes the paperwork: a covered company must keep books and records that accurately and fairly reflect its transactions and must maintain an adequate system of internal accounting controls. A company can commit an FCPA violation without anyone proving a bribe changed hands, if its records hide what actually happened.
That second door is why third-party agents matter so much. A sales agent in another country rarely invoices a government official directly. The money moves through consulting fees, commissions, or marketing expenses that look ordinary on their face. Under the accounting provisions, the company's obligation is to record those payments accurately and to build controls that can catch the ones that are not ordinary.
According to the Department of Justice's FCPA Unit, the statute, enacted in 1977 and amended since, makes it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. The same page states that companies whose securities are listed in the United States must meet the statute's accounting provisions, which require accurate books and records and an adequate system of internal accounting controls.
What do the two sets of provisions actually require?
The anti-bribery provisions prohibit the corrupt use of the mails or any instrumentality of interstate commerce in furtherance of an offer, payment, or promise of money or anything of value, when the payer knows that all or part of it will go, directly or indirectly, to a foreign official to influence that official in an official capacity, to induce an act in violation of the official's lawful duty, or to secure an improper advantage in obtaining or retaining business. The word "indirectly" carries most of the weight. A payment routed through an agent, a distributor, or a joint-venture partner still counts.
The accounting provisions operate in tandem with the anti-bribery rules, as the Justice Department's overview puts it. They apply to corporations whose securities are listed in the United States and impose two duties: make and keep books and records that accurately and fairly reflect the corporation's transactions, and devise and maintain an adequate system of internal accounting controls. The first duty targets the record of what happened. The second targets the machinery that should have caught it.
Why does Congress reach into accounting at all? Because a bribe has to be paid for, and the payment has to be described somewhere. The accounting provisions close the loophole where a company pays clean but books dirty.
How do slush funds and mislabeled expenses expose a company?
Enforcement patterns in this area follow a small number of recognizable record-keeping devices. None of them requires sophistication, which is the point. The schemes are simple enough to hide in plain ledgers.
- Off-book slush funds. Cash or side accounts maintained outside the official books, used to pay officials without any record existing at all.
- Mislabeled payments. A bribe recorded as a consulting fee, a commission, a marketing expense, or a customs "facilitation" charge. The entry exists; it describes the wrong transaction.
- Inflated or fictitious invoices. An agent bills for services never performed, and the excess funds the improper payment. The books are accurate about the amount and false about the purpose.
- Round-tripped or unrecorded reimbursements. Money returned to an employee in cash or through expense reports, leaving no trace of the underlying payment.
Each device creates two violations in one. The underlying transaction may violate the anti-bribery provisions. The record that disguises it violates the books-and-records requirement, and the failure of controls to catch it can violate the internal-controls requirement.
Why do third-party agents create the biggest exposure?
Companies rarely pay officials themselves. They hire local agents who know the procurement process, the regulators, and the officials. The statute anticipates this: the anti-bribery provisions reach payments made "directly or indirectly," and since the 1998 amendments, they also apply to foreign firms and persons who cause an act in furtherance of a corrupt payment to take place within U.S. territory, whether directly or through agents.
For the accounting provisions, the agent relationship is the pressure point. A company must record what it pays the agent accurately and must have controls adequate to understand what the agent does with the money. When an agent's commission runs far above market norms, or when an agent asks to be paid through a third country, those are control questions before they are bribery questions. The books-and-records provisions give regulators a parallel path: even where proving a corrupt intent behind a specific payment is hard, proving that the records did not fairly reflect the transactions is often not.
Practical steps for a company follow from the structure of the rule rather than from any checklist. Know what the agent is being paid and why. Match invoices to deliverables. Treat unusual payment routes as control events, not as the agent's business. Document the review. The adequacy of internal accounting controls is judged by what the system was designed to catch.
Who enforces the accounting provisions, and what is the posture today?
Enforcement is split between the Department of Justice, which handles criminal anti-bribery cases, and the Securities and Exchange Commission, which brings civil actions, including for accounting violations by issuers. The Justice Department's FCPA Unit provides an overview of both the statute and its own opinion procedure, through which a company can seek the Department's view on whether specific contemplated conduct would comply with the anti-bribery provisions. The Department directs particular compliance questions about specific conduct to counsel and to that procedure.
The statute's reach has also widened on the other side of the transaction. The Justice Department's page describes the Foreign Extortion Prevention Act, enacted in July 2024, which criminalizes the "demand side" of foreign bribery: a foreign official who corruptly demands or accepts payments in connection with obtaining or retaining business. FEPA carries penalties of up to 15 years' imprisonment and a fine of up to $250,000 or three times the monetary equivalent of the thing of value demanded. Unlike parts of the FCPA, FEPA provides no civil remedies and gives the SEC no enforcement authority. For related coverage, see SEC Cybersecurity Disclosure Rules: What the Four-Day 8-K Requirement Demands.
What this means for governance and the audit trail
Our analysis of the statute's structure is that the accounting provisions do the quiet enforcement work. A bribery case requires proving corrupt intent. A books-and-records case requires proving the ledger is wrong, which auditors, internal investigators, and even whistleblowers can document from the company's own files. That is why FCPA matters so often begin as accounting questions: an expense that does not reconcile, a vendor with no apparent capacity, a commission that does not match the contract.
The governance implication sits with the audit committee and the controllers, not only with the compliance office. Related-party payments, agent commissions, and discretionary expense accounts are the categories where inaccurate records and bribery risk overlap. Readers tracking the audit committee's gatekeeping role in adjacent territory will find the same logic in Related-Party Transactions: Item 404 Disclosure and the Audit Committee's Gatekeeping Role, where disclosure duties and committee review follow a similar design: the record must show the transaction as it is. This connects to our earlier piece, Related-Party Transactions: Item 404 Disclosure and the Audit Committee's Gatekeeping Role.
The trade-off is real. Tighter controls cost money and slow deals, and an agent who will not accept documentation may be an agent a company cannot afford. But the accounting provisions are not a paperwork technicality. They are the statute's way of saying that a company's books are the first place a bribery scheme becomes visible, and the last place it should be allowed to hide.
Where does a company go for a binding answer?
The Justice Department's FCPA Opinion Procedure exists for exactly this situation. A company weighing specific conduct can seek the Department's view before acting, and the Department's guidance directs particular compliance questions to counsel as well. Neither step substitutes for the underlying duties: accurate records, adequate controls, and no corrupt payments, directly or through agents, to foreign officials to obtain or retain business.
