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Severity of US sanctions against foreign firms: evidence from the FCPA enforcements

Emre Kuvvet (Nova Southeastern University, Fort Lauderdale, Florida, USA)

Journal of Financial Crime

ISSN: 1359-0790

Article publication date: 24 January 2022

Issue publication date: 2 January 2023

53

Abstract

Purpose

The purpose of this study is to examine whether foreign firms pay disproportionately higher monetary penalties after controlling for factors that affect the sanctioning of the firm.

Design/methodology/approach

In this paper, a cross-sectional data analysis has been used to examine the enforcement actions of the Foreign Corrupt Practices Act (FCPA) against all private and public companies from 1978 to 2019.

Findings

The findings indicate that that foreign firms pay disproportionately higher monetary penalties than domestic firms after controlling for factors that affect the sanctioning of firms. On average, foreign firms pay $43.3m more to the US government than US firms pay. This is a considerable difference in monetary penalties and equal to 68.95% of the average monetary penalty.

Originality/value

This paper shows that the US government treats US firms more favorably than foreign firms in monetary sanctions. Because the FCPA is not applied equally, this is contrary to US government guidelines and to the rule of law. The government needs to reconsider the consequences of imposing disproportionately higher penalties on foreign firms. Given the lack of judicial scrutiny of the FCPA settlement amounts against foreign firms, prosecutorial harshness against them can be remedied by amending the FCPA to eliminate the unequal treatment of foreign entities.

Keywords

Citation

Kuvvet, E. (2023), "Severity of US sanctions against foreign firms: evidence from the FCPA enforcements", Journal of Financial Crime, Vol. 30 No. 1, pp. 114-129. https://doi.org/10.1108/JFC-12-2021-0267

Publisher

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Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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