Facilitating Payment

A facilitating payment is a financial payment that may constitute a bribe and is made with the intention of expediting an administrative process. It is a payment made to a public or government official that acts as an incentive for the official to complete some action or process expeditiously, to the benefit of the party making the payment.

In general, a facilitating payment is made to smooth the progress of a service to which the payer is legally entitled, even without making such a payment. In some countries, these payments are considered normal, whereas in other countries, facilitating payments are prohibited by law and considered bribes. Also called facilitation payments.

At times, facilitating payments can be expected by low-level, low-income officials in exchange for providing a service to which the payer is entitled to even without the payment. Certain countries do not consider facilitating payments bribes - as long as such payment is not made to earn or maintain business, or to create an unfair or improper advantage over another business. Such countries may believe these payments are simply a cost of doing business. In other countries, including the United Kingdom and Germany, facilitating payments made abroad are considered bribes and are prohibited.

An example of a facilitating payment is illustrated in the following scenario. Assume a business required a particular license or permit to operate. The company is entitled to the license or permit because it has met all requirements. The business is otherwise poised to open its doors for business but is legally bound to wait until the license or permit is officially issued. The company may make a facilitating payment to an official who can help “expedite” the licensing or permitting process. In many countries, this payment would be acceptable as long as it does not involve a payment made to a foreign entity. In other countries, this would still be considered a bribe (and thus illegal).

The United Nations Convention against Corruption (UNCAC) prohibits facilitation payments. The legal status of facilitating payments varies by country. The Business Anti-Corruption Portal maintains information regarding different countries' profiles regarding corruption, bribes and facilitating payments.

Unsurprisingly, for years companies doing business on an international scale have frowned upon, if not altogether prohibited, the use of facilitation payments. While outright fraud and bribery are of central concern, another more subtle but important rationale for restricting their use arises as companies increasingly recognize facilitation payments are inconsistent with corporate governance cultures prohibiting corruption and international anti-corruption programs.

While the sweeping prohibition on paying bribes to foreign officials makes clear sense, exceptions persist.

To give U.S. businesses more latitude in competing with foreign competitors, Congress passed the Omnibus Trade and Competitiveness Act of 1988. The act offers a narrow exception for “facilitating or expediting payments” made to further a routine governmental action that involves non-discretionary acts. [See 15 U.S.C. §§ 78dd-1(b), “Prohibited foreign trade by issuers.”]

However well-intentioned, in reality, entities and individuals struggle with the limitations of the thin facilitating payment exception – as it’s often difficult to determine when lines have been crossed between an illegal bribe and an exception permissible facilitating payment.