Companies have been urged against rowing back on their anti-corruption activity after US President Donald Trump ordered the Department of Justice (DoJ) to halt the enforcement of a US law that bans Americans from bribing foreign government officials to win business.

Last week, Trump issued an executive order to pause enforcement of the 1977 Foreign Corrupt Practices Act (FCPA) for 180 days, after the White House said the Act was making American companies less competitive. The move has been criticised as undermining an important tool in cracking down on individual as well as corporate misconduct.

According to the White House, the law puts US firms at a disadvantage to foreign competitors because they cannot engage in practices that are “common among international competitors, creating an uneven playing field”.

The reasons cited were the need to realign US anti-corruption enforcement with broader American economic and national security interests. The executive order directs the attorney general to issue revised, reasonable FCPA enforcement guidance that promotes American competitiveness and efficient use of federal law enforcement resources.

Primary tool to combat bribery and corruption

The FCPA has been a primary tool of federal law enforcement to combat bribery and corruption and enhance transparency in international business operations. The anti-corruption watchdog Transparency International said the FCPA made the US a leader in addressing global corruption.

However, Trump’s executive order “diminishes – and could pave the way for completely eliminating – the crown jewel in the US’s fight against global corruption,” Gary Kalman, executive director of Transparency International US, said in a statement.

“The world must not default to where bribery and corruption are the norm. A race to the bottom harms both the citizens in the country and the businesses involved in corrupt transactions,” Kalman said.

Bribery remains illegal

In practice, the executive order means that the DOJ will not initiate any new FCPA investigations or enforcement actions unless explicitly authorised by the attorney general. The DOJ will also reassess ongoing FCPA cases to ensure they restore proper bounds on FCPA enforcement and preserve presidential foreign policy prerogatives.

However, experts are warning organisations that bribery remains illegal and the civil enforcement powers of the Securities and Exchange Commission remain unaffected. Similarly, enforcement of other global anti-bribery and corruption legislation such as the UK Bribery Act continues. And a ‘pause’ does not mean no future enforcement action will ever be taken by the US DoJ.

Patrick Rappo, a partner in the London office of law firm Reed Smith and a former Joint Head of the Bribery and Corruption divisions at the UK Serious Fraud Office, said in a post on LinkedIn: “Bribery remains illegal. Compliance programmes remain essential, for anti-bribery, fraud, money laundering and sanctions issues, to name a few. 

Corruption Perceptions Index

The White House announcement coincides with the launch this week of Transparency International’s 2024 Corruption Perceptions Index, which ranks countries by the perceived level of corruption in their public sectors. The result is presented on a scale of zero (perceived as highly corrupt) to 100 (perceived as very clean).

The Index reveals that the global fight against corruption has hit a plateau, with established democracies in particular showing concerning declines. The UK remains stuck at its lowest score since 2012 at 20th place globally – a dramatic fall from its position just outside the top 10 only three years ago. 

Peter van Veen, Director of Corporate Governance and Stewardship at ICAEW, says the lesson for boards is to stick to your guns in terms of corporate culture and good practice in how you do business, both abroad and domestically. Rowing back on anti-corruption would do damage to both and would at best only offer only short-term gain. 

“Doing business ethically is the right choice because it means you’re competing on the quality of your products and services, rather than just paying someone for access or a contract because that’s a house of cards. Rowing back on anti-corruption is also counterproductive because your stakeholders – including your employees and your customers – are watching. Years and decades of building a good reputation will be destroyed very quickly if changing tack on your anti-corruption and responsible business practices.”

Van Veen said managing systemic risks and keeping the long-term profitability of your business in mind is all about keeping a steady course: “It is about ensuring that people buy into your story underpinned by your company’s values and that you have the training, policies and support for staff so they do not take short cuts and break the law. It’s about culture, it’s about values and it’s about focusing on being profitable in the long run.”