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Corruption does not represent a significant business risk for foreign investors in the US, and companies do not consider corruption an obstacle to their operations. The US offers a competitive market and abundant business opportunities; however, companies should be prepared to deal with bureaucracy due to the decentralized structure and business activities governed by federal, state, county and municipal laws. Business costs are increased by extensive anti-corruption legislation and tough requirements for compliance and internal controls. Money laundering, abuse of office, extortion and commercial bribery are prohibited by law. Companies should be aware the US government actively and effectively enforces the established anti-corruption legislative framework, including the FCPA. The FCPA provides a narrow exception for facilitation payments and for recorded gifts of appropriate, minimal value. While gifts and facilitation payments are uncommon in practice, they may violate other anti-corruption laws depending on their value and purpose.
Last updated: November 2015
Corruption in the US judiciary is a low risk for companies. Foreign companies perceive the US judicial system as independent and efficient (GCR 2015-2016). The Securities and Exchange Commission, an independent government organ tasked with enforcing FCPA regulations, protecting investors and regulating the securities markets, has increasingly come under attack for its use of internal administrative procedures and in-house judges instead of Federal Courts (WSJ, Aug. 2015).
It is unlikely for businesses to encounter corruption in the US police. The country performs well in relation to the reliability of police services to protect companies from crime (GCR 2015-2016). Businesses reveal that organized crime can increase enterprise costs for foreign companies (GCR 2015-2015). While there are only few isolated incidents of corruption within the police, almost half of surveyed US citizens perceive the police as corrupt (GCB 2013).
Corruption risks when acquiring public services in the US are minimal. Administrative requirements when applying for permits or licenses are demanding and represent as one of the most problematic factors for doing business (GCR 2015-2016). Public services are not affected by corruption and business start-up costs are minimal in comparison to other developed economies (DB 2015).
Corruption is not reported to be a risk for foreign companies working with land authorities in the US. Dealing with construction permits is less time consuming than the OECD average (DB 2015). Registering property takes 12 days in New York City and 20 days in Los Angeles (DB 2015).
Corruption in the tax administration is a moderate risk in the United States. Surveyed businesses report that irregular payments and bribes occasionally occur (GCR 2015-2016). Complex corporate tax laws present a challenge for companies and require a high degree of vigilance (pwc 2014). Business executives consider tax rates and regulations to be among the most problematic factors for conducting business in the US (GCR 2015-2016). Several US companies practice inversion, a widespread tax evasion scheme that allows companies to reincorporate abroad (Economist, Feb. 2015). Firms should be aware of the possibility of being prosecuted in accordance with the FCPA for corruption offences committed abroad, and the corruption risk associated with reincorporation.
Companies should note a small risk of corruption in the otherwise efficient and transparent US customs administration. Burdensome importing procedures and complex tariff structures are the main impediments for international trade, while corruption at ports and borders is considered problematic only by a few companies (GETR 2014). A report by Homeland Security analyzed that the US Customs and Border Protection (CBP) is susceptible to corruption and misconduct within its workforce, and that the agency must increase its efforts to adequately address such risks.
There is a small risk of corruption in US public procurement (GCR 2015-2016). Fourteen percent of surveyed US companies experienced fraud in the form of bribery and corruption (pwc 2015). Publicized cases include a former Boeing Procurement Officer and two sub-contractors who were found guilty of a bribery/kickback scheme involving Boeing military aircraft parts, as well as structuring currency transactions to conceal receipts of the cash bribes (FBI, Oct. 2014). The US public procurement is well regulated by the Federal Acquisition Regulation that aims to contain corruption risks, and applies to all executive and military departments, and to state-owned companies. It contains provisions on conflicts of interest and increases the use of suspension and debarment on companies guilty of fraud and breach of contract (Practical Law, Mar. 2013). Business opportunities, regulations, resources and training are available on Acquisition Central. State agencies collect and report data on public procurement through the Federal Procurement Data System - Next Generation (FPDS-NG). Companies are recommended to use a specialized public procurement due diligence tool to evaluate and avoid corruption risks related to procurement in the US.
The Racketeer Influenced and Corrupt Organizations Act (RICO Act) and the Hobbs Act provide for investigation, prosecution and criminal penalties for public corruption, including abuse of office and extortion. The Travel Act criminalises bribery of US government officials and commercial bribery. Money laundering is criminalised by the Money Laundering Control Act. The anti-corruption legal framework is enhanced by the Sarbanes-Oxley Act (SOX), which addresses fraudulent practices in enterprises, ensures accuracy of corporate disclosures, and provides penalties of up to 10 years in prison for retaliation against whistleblowers. The resource extraction rule of the Dodd-Frank Act requires resource extraction companies to disclose any payments exceeding USD 100,000 made to the US or foreign governments. The Act also introduces rewards to whistleblowers for information that leads to a successful enforcement action.
Enforcement of the anti-corruption legislation by the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) is effective, and companies in the US are under increasing pressure to comply with stringent and wide-reaching anti-corruption legislation.
The most widely enforced anti-corruption law in the world is the Foreign Corrupt Practices Act (FCPA), which prohibits US persons and entities from bribing foreign government officials. FCPA Resource Guide and FCPA Compliance Quick Guide can help companies avoid corruption risks abroad and help comply with legislations. The FCPA provides a narrow exception for facilitation payments and for recorded gifts of appropriate, minimal value. Gifts and facilitation payments may violate other anti-corruption laws depending on their value and purpose.
The US has ratified the OECD Convention on Bribery of Foreign Officials in International Business Transactions (exception for facilitation payments), the United Nations Convention Against Corruption (UNCAC), the Council of Europe’s Criminal Law Convention against Corruption, the Inter-American Convention Against Corruption, and the United Nations Convention against Transnational Organized Crime.
The United States constitution explicitly protects freedoms of speech and of the press. Most media outlets are privately owned and are provided a high level of legal independence. Despite journalists in most states not requiring to disclose their confidential sources and actively reporting on cases of corporate and official corruption, there are reports of pressure on journalists to reveal informants of leaked security information (FitW 2015). News reports are increasingly polarised but the overall media landscape retains a high degree of pluralism (FitW 2015). There is a strong relationship between corporate interests and media coverage. The Freedom of Information Act (FOIA) protects citizens' right to access official information. The media environment and the Internet in the US are considered 'free' (FoP 2015; FoN 2014).
Civil society is well-developed in the US, where trade associations, NGOs and interest groups are offered freedom to organise and pursue civil and policy agendas (FitW 2015). The increasing influence of interest groups on the legislative and policymaking processes in the country due to their critical role in campaign fundraising, has enhanced the perception of corruption in the capital (FitW 2014).
- World Economic Forum: The Global Competitiveness Report 2015-2016.
- World Bank & IFC: Doing Business 2015.
- Freedom House: Freedom of the Press- United States 2015.
- Freedom House: Freedom in the World- United States 2015.
- Pricewaterhouse Cooper: Economic Crime Survey - United States 2015.
- Wall Street Journal: "Federal Judge Rules SEC In-House Judges ‘Likely Unconstitutional’", 12 August 2015.
- Economist: "An offer they could refuse", 7 February 2015.
- World Economic Forum: The Global Enabling Trade Report 2014.
- Freedom House: Freedom on the Net - United States 2014.
- Freedom House: Freedom in the World - United States 2014.
- Pricewaterhouse Coopers (pwc): Doing Business in the United States - 2014.
- Federal Bureau of Investigation: "Former Boeing Procurement Officer and Two Sub-Contractors Sentenced on Federal Fraud Charges", 27 October 2014.
- Transparency International: Global Corruption Barometer 2013.