Facilitating payment
Encyclopedia
A facilitating payment is a certain type of payment to foreign officials which is not considered to be bribery
according to legislation
s of some states as well as in the international anti-bribery conventions, e.g., coming from the OECD.
, however the distinction is often blurred. Determining whether a payment is a facilitating one may be difficult and depend on the circumstances. The value of the payment is not immediately relevant, however the greater the value, the higher are chances that it will be a red flag
for law enforcement. Small unofficial payments are customary and even legal in some countries, nevertheless they may present a risk of liability according to the laws of the host country. There also exists a slippery slope
danger of evolving into dubious payments.
. The following arguments have been made:
Many companies therefore restrict or severely limit making facilitating payments in their policies, however this practice is not yet widespread. For example, , in Australia
, among the S&P ASX 100 only 24 companies control facilitating payments and only 15 are reported to prohibit them.
n law has discrepancies as to the definition of the facilitating payment.
The Criminal Code defines a facilitating payment to be a payment which is
The Income Tax Assessment Act as amended in 1999 permit companies claim facilitation payments as deductions (before 1999 bribes were also valid deductions), but its definition does not refer to the size of the payment.
Many Australian states override the federal legislation and define facilitating payments as illegal.
does not recognize the legality of facilitating payments and does not draw any distinction from bribes. However the OECD notes that the UK is unlikely to prosecute for minor facilitating payments in the areas where it is a common practice.
(FCPA) of 1977 and clarified in its 1988 amendments, is a payment to a foreign official, political party or party official for "routine governmental action," such as processing papers, issuing permits, and other actions of an official, in order to expedite performance of duties of non-discretionary nature, i.e., which they are already bound to perform. The payment is not intended to influence the outcome of the official's action, only its timing. Facilitation payments are one of the few exceptions from anti-bribery
prohibitions of the law.
Bribery
Bribery, a form of corruption, is an act implying money or gift giving that alters the behavior of the recipient. Bribery constitutes a crime and is defined by Black's Law Dictionary as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or...
according to legislation
Legislation
Legislation is law which has been promulgated by a legislature or other governing body, or the process of making it...
s of some states as well as in the international anti-bribery conventions, e.g., coming from the OECD.
Dangers
For legal purposes, it is distinguished from briberyBribery
Bribery, a form of corruption, is an act implying money or gift giving that alters the behavior of the recipient. Bribery constitutes a crime and is defined by Black's Law Dictionary as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or...
, however the distinction is often blurred. Determining whether a payment is a facilitating one may be difficult and depend on the circumstances. The value of the payment is not immediately relevant, however the greater the value, the higher are chances that it will be a red flag
Red flag (signal)
Red flag is a semi-official term to denote various attention and awareness indicators and signals, both explicit and implicit. It can be used in various contexts usually as a warning or when things seem too good to be true as well as unexpectedly good results.The earliest citation for "red flag" in...
for law enforcement. Small unofficial payments are customary and even legal in some countries, nevertheless they may present a risk of liability according to the laws of the host country. There also exists a slippery slope
Slippery slope
In debate or rhetoric, a slippery slope is a classic form of argument, arguably an informal fallacy...
danger of evolving into dubious payments.
Business ethics
While being legal, facilitating payments are still considered to be questionable from the point of view of business ethicsBusiness ethics
Business ethics is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations.Business...
. The following arguments have been made:
- Unfair competitionUnfair competitionUnfair competition in a sense means that the competitors compete on unequal terms, because favourable or disadvantageous conditions are applied to some competitors but not to others; or that the actions of some competitors actively harm the position of others with respect to their ability to...
: smaller business have fewer opportunities and less financial possibilities to "grease" foreign officials. - sustaining questionable business practices.
- dependence on irregular payments creates additional risk and hence discourages investment
Many companies therefore restrict or severely limit making facilitating payments in their policies, however this practice is not yet widespread. For example, , in Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
, among the S&P ASX 100 only 24 companies control facilitating payments and only 15 are reported to prohibit them.
Organisation for Economic Co-operation and Development
OECD defines a payment to be a facilitating one if it is paid to government employees to speed up an administrative process where the outcome is already pre-determined.Australia
, the AustraliaAustralia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
n law has discrepancies as to the definition of the facilitating payment.
The Criminal Code defines a facilitating payment to be a payment which is
- of a nominal value (the term is not defined in the Code)
- paid to a foreign official for the sole or predominant purpose of expediting a minor routine action, and
- documented as soon as possible.
The Income Tax Assessment Act as amended in 1999 permit companies claim facilitation payments as deductions (before 1999 bribes were also valid deductions), but its definition does not refer to the size of the payment.
Many Australian states override the federal legislation and define facilitating payments as illegal.
United Kingdom
, the United KingdomUnited Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
does not recognize the legality of facilitating payments and does not draw any distinction from bribes. However the OECD notes that the UK is unlikely to prosecute for minor facilitating payments in the areas where it is a common practice.
United States
Within the United States federal legislation, a facilitating payment or "grease payment", as defined by the Foreign Corrupt Practices ActForeign Corrupt Practices Act
The Foreign Corrupt Practices Act of 1977 is a United States federal law known primarily for two of its main provisions, one that addresses accounting transparency requirements under the Securities Exchange Act of 1934 and another concerning bribery of foreign officials.- Provisions and scope...
(FCPA) of 1977 and clarified in its 1988 amendments, is a payment to a foreign official, political party or party official for "routine governmental action," such as processing papers, issuing permits, and other actions of an official, in order to expedite performance of duties of non-discretionary nature, i.e., which they are already bound to perform. The payment is not intended to influence the outcome of the official's action, only its timing. Facilitation payments are one of the few exceptions from anti-bribery
Bribery
Bribery, a form of corruption, is an act implying money or gift giving that alters the behavior of the recipient. Bribery constitutes a crime and is defined by Black's Law Dictionary as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or...
prohibitions of the law.