These procedures have been developed to provide guidance concerning compliance with the Foreign Corrupt Practices Act ("FCPA") and the Rochester Institute of Technology's ("RIT" or "Institute") FCPA Policy. These procedures are to be followed as part of RIT's FCPA Policy implementation.
The Policy requires RIT never pay bribes to foreign officials in order to improperly influence that person to favor RIT in its activities or to improperly influence that person to engage in or continue to engage in activities with RIT. RIT employees also need to be aware of other circumstances that might indicate that a violation of the FCPA is taking place, and be aware of "red flags" discussed below that may indicate a potential FCPA violation. If a red flag is identified, the safest approach is to avoid making the payment at issue and consult the RIT Office of Legal Affairs. A number of scenarios discussed in section IV and V below give examples of some of these "red flags".
Strict compliance with these standards and the law is of a greater value to RIT than any opportunities that may be delayed or lost as a result of compliance.
RIT will update and refine these Compliance Procedures to ensure that all employees, faculty, staff, agents, representatives understand the importance of the RIT FCPA Policy and the FCPA.
The FCPA exists to prevent corrupt practices in international business transactions. The Act prohibits bribery of officials and employees who work for foreign governments.
Under the FCPA, bribery consists of corruptly making, offering, authorizing or promising to make a payment of anything of value to any Foreign Official or employee, directly or indirectly, for the purpose of improperly influencing an official act or decision, to obtain or retain business, to direct business to any person or entity, or to secure any improper advantage. These prohibitions are applicable to United States organizations, public or private, and regardless of whether they are pursuing official government contracts or business. They are also applicable to "any person," including a foreign person or firm (including employees and agents), that commits a prohibited act in the United States. Further, a United States entity may be held liable under the FCPA for the improper activities of its foreign subsidiaries if the United States entity authorized or participated in the conduct.
The FCPA prohibits gaining any type of improper benefit by corrupt means. Thus, in any situation where RIT is looking to Foreign Officials to make a decision that benefits the Institute, one must be careful to comply with the FCPA. Examples of these types of situations in RIT international operations may include:
For all of the Institute's international operations, the key to successful policy compliance is open and honest communication. If clarification of the RIT FCPA Policy and/or RIT FCPA Compliance Procedures is needed in any particular situation, please contact the Office of Legal Affairs.
Potential violations or FCPA concerns should be reported immediately to a supervisor, the RIT Office of Legal Affairs or via the RIT Ethics Hotline at (866) 294-9358, (866) 294-9572 TTY, or via the online hotline reporting service at http://www.rit.edu/fa/svp/ethics/. The hotline is available seven days a week, 24 hours a day. Institute policies prohibit retaliation for good faith reporting.
- What does the RIT FCPA Policy require?
- Specific RIT Compliance Procedures
The University Compliance Officer has the authority and the responsibility for the implementation of the actions set forth in this RIT FCPA Compliance Procedures. Any proposed additions, deletions, or changes to the procedures contained herein shall be submitted to the University Compliance Officer, who will coordinate such changes with the Office of Legal Affairs.
All of the Institute's employees, faculty, staff, agents, representatives and other third parties working with the Institute are responsible for complying with the RIT FCPA Policy and these RIT FCPA Procedures. Should you have any questions, please contact the Office of Legal Affairs or the RIT Ethics Hotline at (866) 294-9358 or (866) 294-9572 TTY, or make a report online at http://www.rit.edu/svp/ethics/.
As part of these FCPA Compliance Procedures, all of the Institute's employees, faculty, staff, agents, representatives and other third parties working with the Institute in international operations of any kind will be required to affirm annually in writing that they are familiar with the RIT FCPA Policy and Procedures, understand them, and have not violated their terms or the FCPA in connection with any activities they have undertaken at or for the Institute, and that they agree to abide by the Policy, the Compliance Procedures, and the FCPA.
As part of RIT's FCPA Compliance Procedures, all key personnel who have involvement in international operations will be required to undergo yearly training on this FCPA Policy and Procedures. New employees with involvement in international operations will be trained upon their hire with the Institute and yearly while they are with the Institute. Documentation of training will be maintained.
It is the Institute's policy not to contract with or retain any individual or outside firm with a record of violating the FCPA or similar laws or regulations or that has a documented history of questionable legal or ethical practices. The Institute will use reasonable efforts and diligence to assess the fitness of prospective representatives, consultants, agents, joint venture partners, and other third parties of RIT. The Institute may also choose to conduct periodic reviews of existing third party relationships. The scope of these reviews will vary depending on the nature of the relationship, the location of the relationship, and the facts of the situation.
These reviews will be geared towards ensuring that proposed agents and consultants are qualified to provide the services contemplated and that the relationship will be (or continues to be) in compliance with the law, including the FCPA and any local anti-bribery laws. These reviews will be documented by the department or division undertaking them and may include an examination of the following:
All transactions and contracts must be conducted pursuant to the Institute's Purchasing Policies and Procedures, including those contained in the RIT Purchasing Manual. In addition, any contracts involving, directly or indirectly, Foreign Officials (as that terms is defined by the FCPA) must be in writing and reviewed by the RIT Office of Legal Affairs. At a minimum, these contracts should:
While the Institute does not fall under the accounting provisions of the FCPA, maintenance of proper books and records and internal controls are important in ensuring compliance with our obligations. The Senior Vice President for Finance and Administration and the Controller and Assistant Treasurer are responsible for ensuring that the accounting and recordkeeping activities of the Institute meet RIT's own policies and procedures which are consistent with these FCPA Compliance Procedures. Accordingly, RIT employees with financial reporting duties will adhere to all the RIT Controller's Office Procedures, including but not limited to procedures for reimbursements, check requests, petty cash, and the Accounting Procedures and Protocol Manual. With regard to ethics, legality, and propriety, each employee, faculty, or staff member involved with financial and accounting functions is also responsible for adherence to the RIT FCPA Policy.
All employees who prepare and review the Institute's books and records, who are responsible for the Institute's books and records, who supply information to be included in the Institute's books and records, and who submit requests for reimbursement as part of their duties are responsible for ensuring that the books and records are accurate. Further:
Violations of the RIT FCPA Policy and Compliance Procedures can include false reporting of expenditures, false entries in the Institute's books and records, and the failure to report any transaction or expenditure. No unrecorded fund or asset of the Institute shall be established or maintained. No employee may sign or submit, or permit others to sign or submit on behalf of the Institute, any document or statement that the employee knows or has reason to believe is false or misleading. The Policy also prohibits records that are not complete enough to inform a reviewing party of the actual nature of the transaction.
The Institute through its office of Institute Audit Compliance and Advisement (IACA) Office conducts regularized audits of various departments and operations. As part of these audits or as part of a specific Institute request, IACA may analyze FCPA compliance such as identifying any procedures or business processes that need to be modified, review contractual arrangements with third parties in RIT's international operations, and sample transactions from expense accounts involving international operations.
In addition to the civil and criminal fines and penalties imposed by the FCPA, violators of the RIT FCPA Policy and its related Compliance Procedures may be subject to disciplinary measures imposed by the Institute. Penalties for violations will vary with the circumstances, but may include termination.
- Managing and Maintenance
- FCPA Compliance Certificates
- Training Programs
- Reasonable Diligence
- Criminal history and any relevant press items;
- Past and current customer references;
- Identification of any sub-agents or subcontractors;
- Location of agent or consultant's bank accounts, including legal and banking references;
- Institute's clear need for agent or consultant; and
- Qualifications of agent or consultant.
- Include specific provisions acknowledging the commitment of the Institute and the other contracting parties to comply with the FCPA, any local anti-bribery laws, and the Institute's FCPA Policy in connection with the agreement at issue;
- Contain a provision that any violation of the FCPA, the Institute's FCPA Policy, or any applicable law or regulation provides the Institute with cause to terminate the contractual relationship and a forfeiture of any payments still owing under the terms of the contract;
- Contain language that all contracting parties and any sub-agents or subcontractors will consent to and cooperate in any due diligence that the Institute believes appropriate to facilitate the FCPA Policy;
- Contain language that all contracting parties will advise in writing of any sub-agents or subcontractors;
- Identify whether any employees or agents of the contracting party are Foreign Officials; and
- Contain a provision that all contracting parties will keep accurate records and will make available records relating to the contract.
- Internal Controls and Records
- Payments for any services rendered to RIT by a Foreign Official or an officer or official of a foreign government-owned entity, including honorarium payments and reimbursements of expenses, are made solely to the foreign government agency or instrumentality employing the individual; such payments are made by check directly to the foreign government agency or instrumentality, or by wire to its named bank account within the foreign government agency's or instrumentality's country, or by wire to its duly authorized correspondent bank within the United States; and no such payment is made without prior review of the Office of Legal Affairs.
- Disciplinary Actions
- The FCPA's Legal Provisions and Definitions
The United States Government broadly interprets this Act, and as a result, the term "foreign officials" can include officials or employees of: foreign governments (including armed forces or any departments, agencies, or instrumentalities thereof), foreign state-run or state-owned enterprises or entities; public international organizations; and foreign political parties. The term can also include close family members or relatives of such officials or employees; candidates for foreign public office; and anyone acting "for or on behalf of" a foreign government (including agencies, departments, instrumentalities, and consultants). This broad interpretation includes entities partially or wholly owned by a foreign government, or entities in which the foreign government has the power to appoint board members or the power to exercise effective or de facto control.
While the above descriptions are the most common examples of foreign officials, they are not exhaustive. If you are not sure if a person is a foreign official, consult the RIT Office of Legal Affairs.
A corrupt intent is required, but the agencies that enforce the FCPA often are able to prove such intent from the circumstances of the payment or gift. Under the Act, corruptly providing anything of value to a foreign government official or employee, such as meals, entertainment, an interest in a business venture, or other gift, is prohibited, with some narrow exceptions described below.
Prohibited payments can be direct or indirect. If a third party such as a local consultant or agent makes a payment on behalf of a United States entity or its foreign subsidiary, there may still be legal liability. Because the Institute is concerned with preventing any improper transfers to Foreign government Officials and private citizens who could funnel the items to government officials, employees, faculty, staff, agents and representatives (or other third parties) of the Institute should refer to and follow the procedures outlined in the RIT FCPA Policy and Compliance Procedures regarding making any payments, giving any gifts, or providing any hospitality.
It is not possible to avoid the requirements of the FCPA by turning a blind eye to potentially improper payments - if the payor ignores circumstances that indicate bribery is taking place, actual knowledge of bribery may not be necessary for an FCPA violation and the payor may be held accountable for the improper payment.
As a rule, any payments or gifts offered to foreign government officials or employees are presumed improper unless they fit within one of the limited exceptions detailed below. Because these exceptions are narrow, before making a payment or providing anything of value to a foreign official (as described above) or to any person or entity that has been retained by the Institute to perform any services that could involve interaction with a foreign government, foreign political party, or a foreign official, should consult with the RIT Office of Legal Affairs prior to making such payments. Documentation of any payment or services under these exceptions must be accurately recorded.
No payment, even ones listed below, are permitted if it could be construed as being made in order to influence any official decision, obtain or retain business, direct business to any person or entity, or provide an improper advantage. Written approval must be obtained from the RIT Office of Legal Affairs before any of these exceptions justify delivering anything of value, directly or indirectly, to a Foreign Official.
The FCPA provides for criminal and civil penalties for violators - both on an individual and entity level. Penalties include:
- Who is a Foreign Official?
- What is an Improper Payment or Gift?
- Limited Exemptions/Permissible Payments and Procedures Under the FCPA
Facilitation payments are payments made to Foreign Officials in order to facilitate or expedite routine governmental actions. These payments cannot be made to influence any discretion on the part of any official and must be allowed under local laws. A facilitating payment is only allowed for something to which the Institute is already entitled. Payments falling into this exception are rare and it is the Institute's policy to discourage reliance on this exception. Please consult the Office of Legal Affairs if you believe there is a situation involving this exception.
The Institute may pay or reimburse Foreign Officials or employees for reasonable and bona fide expenses directly connected with visits to the Institute's facilities for promotion, demonstration, or explanation of the Institute's facilities, products, or services or that are directly connected to the execution or performance of a contract with a government. Reasonable and bona fide expenses, such as meals, hotel accommodations, and travel expenses, are limited to expenses for a direct itinerary from the point of origin to the location of the Institute's facility (no side trips) by a foreign government official or employee with a legitimate official reason for the visit (no expenses are paid for spouses or family members). Please consult the Office of Legal Affairs if you believe there is a situation involving this exception. Please consult the Office of Legal Affairs if you believe there is a situation involving this exception.
Legitimate promotional expenses for meals and entertainment are permitted for Foreign government Officials or employees if they are of nominal value in the locality, infrequent, not made with any regularity, and not offered for an improper purpose (for example, not in return for any favor or benefit or to improperly influence any official decision). Actual gifts are allowed only if they fall within the above parameters and do not exceed $25 U.S. Dollars. Please consult the Office of Legal Affairs if you believe there is a situation involving this exception.
It is permissible to make payments to vendors and other third parties for bona fide services. These payments, however, must not be used as a channel for bribes or other improper payments. Subject to approval from the Office of Legal Affairs, it is permissible to make a payment for legitimate services rendered to the Institute in its foreign operations, provided that such arrangement is legal under the local law and that the payments are reasonable in view of the quantity and quality of the services provided. Please consult the Office of Legal Affairs if you believe there is a situation involving this exception.
The FCPA allows payments that are "lawful under the written laws and regulations" of the foreign country. While this exception sounds permissive, in practice it is quite restrictive. The foreign country's written laws or regulations must explicitly allow the payment at issue. It is not sufficient to identify a mere practice of such payments within a foreign country. Because of the narrow qualities of this exception, it is the Institute's policy to discourage use and reliance on it. Please consult the Office of Legal Affairs if you believe there is a situation involving this exception.
- Facilitation Payments
- Promotional Visits and Facilities Inspections
- Infrequent Gifts, Meals, and Entertainment of Nominal Value
- Payments to Third Parties for Bona Fide Services
- Payments Lawful Under the Written Laws and Regulations of Foreign Country
- Statutory Penalties
- Disgorgement of profits (all profits made on the affected transaction could be confiscated by the United State)
- Fines (up to $2,000,000 for companies and $250,000 per individual, per violation, or up to twice the pecuniary gain or loss caused by the improper payment)
- Prison (up to five years in prison)
- Other government action, including injunction against conducting certain business (such as a denial of export privileges) or exclusion from government contracts.
- RIT Penalties, will vary with the circumstance, but may include termination.
- Particular Areas of Concern for RIT
Please note that this list is illustrative and not exhaustive.
- Applying for licenses for existing or new operations in a country;
- Submitting to health and safety inspection in other countries;
- Reimbursements for travel and entertainment of Foreign Officials;
- Applying for funding from governmental or state-owned entities overseas;
- Engaging in joint activities with foreign organizations and institutions;
- Applying for accreditation in foreign countries; and
- Importing or exporting products or information.
- Common Issues Requiring Increased Awareness
If a bribe to a Foreign Official is made by a third party on the Institute's behalf, the Institute may still be liable under the law. Therefore, payments to third parties must not be used as a channel for other improper payments and diligence must be taken when hiring local vendors and other third parties.
It is important to examine any suspect circumstances that may exist in determining whether to retain a particular outside individual or entity. A few examples of Red Flags are:
Care should be taken when paying the travel expenses of a Foreign Official. In some situations, it is appropriate to pay for travel expenses associated with necessary business travel. The Institute will only reimburse those travel expenses that are necessary to cover the business aspects of any trip.
For example, if an official must visit one of RIT's facilities to conduct an official inspection in order to issue a permit, and the locality allows the permit seeker to pay for the travel expenses, it may be acceptable for RIT to pay for the expense. But:
Maintaining an international presence requires a keen awareness of local customs and etiquette. In some cases, such etiquette requires that gifts be exchanged prior to engaging in certain activities or at the applicable holiday times. It is Institute policy to prevent those situations where the value of gifts or other circumstances could lead to the conclusion that the gift was given to an official in order to gain improper influence, which would violate the FCPA, even if it is a common practice in the local jurisdiction. Cash gifts are prohibited.
Issues are often discussed over a meal or at an entertainment event. If such meals or entertainment extend beyond what is reasonable and customary for a Foreign Official, then the expense may be determined as a violation of the FCPA.
The FCPA Compliance Procedures outlined herein must be followed in all cases. Local rules for dealing with foreign officials may be stricter than RIT procedures. RIT Employees must check the local rules prior to making any payments and are responsible for keeping adequate records to document the reasonableness and legitimacy of these expenses.
Discounts should benefit the person or entity actually paying for the product or service. Discounts, rebates, and free goods given in connection with sales transactions involving RIT's products and services must not be used as a channel for bribes or other improper payments.
- Payments to Local Vendors and Other Third Parties
These are only examples and do not represent an exhaustive list of warning signs or red flags. If you observe any of these (or other) red flags, consult with the RIT Office of Legal Affairs. When in doubt, or in the event that any proposed payments may pose any FCPA issues or other inconsistencies with United States or local laws, consult with the RIT Office of Legal Affairs.
- Is there a reason to think that the local agent is making payments to local officials, or potentially works for an entity owned by a local official or a relative? If the local agent makes references to any "special accommodations" that have to be made with local officials or says that you should not ask too many questions about how business gets done in the local jurisdiction, these should be considered red flags and investigated. The vendor or third party to be engaged should have an established reputation in the local jurisdiction and be able to provide details of his or her credentials in the business area.
- Is the proposed payment structure standard for this type of work? If the local agent demands fees that seem out of line with what should be standard for the transaction, or asks for payment to an offshore bank account, in cash, up-front, in a different name, to a shell corporation, to an account in a different country, through private payment procedures, or to an unrelated third party, these are also red flags. In addition, requests for unusually large commissions, large contingency fees or commissions going to third parties are red flags. If there are large and numerous end-of-year adjustments, these are red flags. New customers granted unusual credits and inconsistent invoicing or over-invoicing are red flags.
- Are the services to be provided well defined? If the local agent is hesitant to provide the details of the services to be performed, or will only state that he or she will "do what it takes to get the deal done" in the local jurisdiction, this may be a red flag.
- Are international third parties refusing to complete the FCPA compliance certificate? If the local agent refuses to sign the compliance certificate or agree to revised language in the contracts, this is a red flag.
- Where are the payments made? It is important to consider the business atmosphere in which the third party operates and whether the locale has a reputation for improper payment activities.
- What are the qualifications of the local third party or vendor? If the local third party to be engaged lacks experience in the industry or lacks qualifications or adequate facilities, then red flags exist.
- Are there special requests? If the foreign official suggests that a specific representative handle the work, requests high service related fees, adds premiums to the contract or suggests that the Institute must use a specific contractor not typically used or known by the Institute, it is a red flag.
- Payment of Travel Expenses to Foreign Officials
Prior to inviting and/or paying for the travel of any Foreign Officials, RIT must review the payment with the Office of Legal Affairs. Employees are also responsible for keeping adequate records to document the reasonableness and legitimacy of these expenses.
- The Institute cannot pay for any expenses that are not related to the necessity of the trip.
- The Institute cannot be involved in the selection of which foreign official will make the inspection.
- The Institute cannot pay for side-trips that have a personal benefit to the official.
- The Institute cannot pay for travel expenses for friends or family members.
- Gifts and Gratuities
- Business Meals and Entertainment
- Payments to Local Vendors and Other Third Parties
- FCPA Ethics Hotline - What should you do if you have any concerns about the FCPA?