An analysis of the effectiveness of the foreign corrupt practices act in combating corruption



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The Foreign Corrupt Practices Act (FCPA) has a dual purpose of protecting United States businesses (and importantly, their investors) and combating corruption abroad. The latter purpose is the focus of this study. Reduced corruption has been linked to improving human rights conditions and supporting development projects; thus, if the FCPA reduces corruption, it can positively impact other United States' concerns. Given this importance, this study seeks to determine whether the FCPA reduces corruption in targeted countries. FCPA enforcement actions brought by the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) from 1998 to 2012 were compiled and allocated by country where the underlying bribery took place. The top ten countries from which the most FCPA enforcement actions arose were selected for individual case study. The level of corruption in each country was approximated with the World Bank's Control of Corruption Indicator (CCI) for the relevant time period of 1998 to 2012. The number of FCPA enforcement actions are compared to this CCI score to determine if the FCPA reduced corruption in those countries relative to countries without as many FCPA enforcement actions. This comparison, both individually and collectively, is not able to demonstrate that FCPA enforcement reduced levels of corruption in those countries that gave rise to the most enforcement actions. Thus, although the FCPA may be an important tool in the toolbox of international regulations the United States uses in combatting corruption, as well as promoting human rights and international development, it alone does not appear to significantly reduce corruption abroad.