Foreign Corrupt Practices Act (FCPA) – why it matters for DACH companies expanding to the US
The US Foreign Corrupt Practices Act (FCPA) is far more than an “American law for American companies”. For DACH manufacturers, defence suppliers and global M&A players, it defines how you may act worldwide when US jurisdiction is in play. This article offers a compact FCPA summary, core obligations and practical implications for international expansion.
What is the Foreign Corrupt Practices Act?
The FCPA is a US federal law that targets bribery of foreign officials and imposes strict accounting and internal control duties on companies with a US nexus. Enacted in 1977 and continuously sharpened since, it is enforced primarily by the US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC).
The FCPA has two main pillars:
- Anti‑bribery provisions – prohibit corrupt payments to foreign officials to obtain or retain business.
- Accounting provisions – require accurate books and records and adequate internal controls.
For DACH “hidden champions” looking at US market entry, especially in sensitive sectors such as defence‑related technologies, the FCPA often becomes the most important extra‑territorial compliance regime after EU and local law.
Who is subject to the FCPA?
The FCPA has a deliberately broad reach. It can apply in three main constellations:
- US issuers – companies listed on a US stock exchange or required to file reports with the SEC.
- US domestic concerns – US citizens, residents and entities (e.g. US subsidiaries, LLCs).
- Non‑US persons – any foreign company or individual that causes an act in furtherance of a corrupt payment to occur within US territory (including the use of US mails, banking system or servers).
In practice, FCPA exposure often arises where a DACH group sets up a US sales entity, uses US‑dollar transactions, cooperates with US defence partners or acquires a US or non‑US target with a US nexus in the course of global M&A.
Core elements of FCPA anti‑bribery rules
The anti‑bribery provisions focus on five key elements:
- Anything of value – not only cash, but also gifts, travel, hospitality, job offers, discounts, charitable donations or other benefits.
- To a foreign official – includes officials of foreign governments, state‑owned enterprises, public international organisations and, in some cases, employees of majority state‑owned companies.
- Corrupt intent – the payer acts with an improper purpose to influence the official.
- Business purpose test – the goal is to obtain, retain or direct business or secure an improper advantage.
- Direct or indirect payments – liability can arise through third parties such as agents, distributors, consultants or joint‑venture partners.
“We did not know what our local agent was doing” is rarely a successful defence if warning signals were visible and no robust compliance system was in place.
Accounting, books and internal controls
The accounting provisions apply primarily to issuers but function as a global standard of good practice. Businesses must:
- Maintain accurate books and records that reasonably reflect transactions and asset dispositions.
- Implement internal accounting controls to prevent and detect improper payments.
For groups expanding into the US, this has concrete consequences: expense policies, approval thresholds, due diligence documentation and distributor contracts must be aligned with FCPA expectations. In M&A transactions, target companies’ books and compliance culture require systematic review to avoid inheriting hidden FCPA risks.
Penalties and personal liability
FCPA breaches can trigger severe consequences:
- Criminal fines for companies and individuals.
- Civil penalties and disgorgement of profits.
- Debarment risks from government business or defence‑related work.
- Personal exposure of managers, compliance officers and involved employees.
Authorities regularly cooperate across borders, and settlements in the multi‑million or even billion‑dollar range are no longer exceptional. For owners and managing directors, FCPA compliance is therefore not “just another rule” but an essential shield for corporate and personal liability.
How does the FCPA interact with US market entry?
For DACH companies, US expansion commonly follows two routes: establishing a US entity (ringfencing) and/or using distributors or agents. Both have specific FCPA implications:
- A US subsidiary becomes a “domestic concern” and must adopt clear anti‑bribery policies, training and control systems.
- Third‑party intermediaries require risk‑based due diligence, contractual safeguards, audit rights and ongoing monitoring.
Proper structuring can significantly reduce the risk that potential wrongdoing in a high‑risk jurisdiction jeopardises the entire group, especially when US defence‑related business is involved.
FCPA and global M&A: why due diligence is crucial
In cross‑border M&A, FCPA plays a central role in transaction risk assessment. A buyer that acquires a company with a history of corrupt practices may inherit investigations, fines and reputational damage.
Key elements of FCPA‑focused M&A due diligence include:
- Review of high‑risk markets, public tenders and dealings with state‑linked customers.
- Analysis of payments to agents, consultants and distributors.
- Assessment of internal controls, training and whistleblowing systems.
- Negotiation of warranties, indemnities and price adjustments reflecting identified risks.
This is particularly relevant for owner‑managed groups in the 50–70 age band considering international portfolio optimisation or sale of business units.
How LANA AP.MA International Legal Services approaches FCPA risk
LANA AP.MA International Legal Services, headquartered in Frankfurt am Main with additional offices in Basel and Taipei, is a boutique law and economic advisory firm founded in 2021 and led by Dr. Stephan Ebner. The firm combines US market entry / defence and global M&A/transactions into an integrated advisory offering.
For FCPA‑related issues, the approach is:
- Aggressive in risk identification – early detection of FCPA exposure in structures, contracts and planned transactions.
- Comprehensive in design – linking legal analysis with economic incentives and operational processes.
- Internationally anchored – with a rare combination of Western practice background and bar admission in Taiwan, relevant for Asia‑linked supply chains.
More information is available at lanaapma.com and lanaapma.ch.
Practical example: FCPA compliance in US defence‑related market entry
A mid‑sized DACH engineering group plans to enter the US defence‑related market via a newly formed US subsidiary and specialised distributors. Key questions include:
- How to structure the US entity so that FCPA risks are ringfenced from the European parent?
- Which due‑diligence steps are necessary for distributors active near government customers?
- How to align premium pricing strategies with strict compliance requirements and documentation?
By combining entity structuring, distributor screening and clearly documented compliance processes, FCPA risk can often be substantially reduced while still realising US premium price potentials rather than competing purely on cost.
Key FCPA takeaways for decision‑makers
- The FCPA applies globally wherever there is a US nexus, including many DACH‑based groups.
- Anti‑bribery and accounting provisions demand active compliance management, not just formal policies.
- US market entry and global M&A strategies should integrate FCPA considerations from the outset.
- Ringfencing structures, robust third‑party management and transaction‑oriented due diligence are central tools.
The Foreign Corrupt Practices Act is a cornerstone of international compliance and a decisive factor in US‑oriented growth strategies. Properly addressed, it need not block expansion but can frame a structured, liability‑conscious approach to the US market and cross‑border M&A. If you want to clarify your company’s specific FCPA exposure in the context of US entry or a planned transaction, book a short intro call with LANA AP.MA International Legal Services via lanaapma.com today.
