In today’s global business landscape, many U.S. companies operate through subsidiaries in countries where local corruption and pressure from government officials remain persistent issues. A recurring question we hear from clients is whether the U.S. parent company faces legal risk when a foreign subsidiary makes a payment to local officials under coercion or threat. The answer is yes—such payments can create significant exposure under U.S. law.

The Foreign Corrupt Practices Act (FCPA), a key federal statute designed to combat international corruption, applies to U.S. companies and their foreign subsidiaries alike. The FCPA prohibits offering, promising, or giving anything of value to foreign government officials for the purpose of obtaining or retaining business or securing any improper advantage. This prohibition applies even if the payment was made under duress, and even if the U.S. parent company did not directly authorize the payment. In fact, a parent company can still be held liable if it knew, or should have known, about the conduct of its foreign affiliate.

Moreover, the FCPA includes provisions requiring public companies to maintain accurate books and records and implement internal controls. Payments made to foreign officials—if not properly recorded or inaccurately described in the company’s books—may also trigger violations of these accounting rules. This is true even if the bribe was paid by a subsidiary operating entirely outside of the United States. Mislabeling a cash payment as a routine service expense, for example, could lead to serious consequences if discovered.

Violations of the FCPA can result in both civil and criminal penalties. The U.S. Department of Justice and the Securities and Exchange Commission actively enforce the law, and companies have faced multi-million-dollar fines, reputational damage, and even criminal prosecution of individual executives. For publicly traded companies, the risk of shareholder lawsuits and regulatory scrutiny adds another layer of exposure.

To mitigate these risks, it is essential that U.S. companies adopt and enforce robust anti-corruption policies that apply globally. Local management and finance teams at foreign subsidiaries should be trained on anti-bribery laws and encouraged to escalate any suspicious or coercive demands. Companies should ensure that appropriate reporting procedures are in place and that internal audit and compliance functions are equipped to detect and respond to red flags. If questionable payments have already occurred, it is critical to consult legal counsel without delay and consider whether voluntary disclosure to authorities may be advisable.