Facilitation Payments Explained_ Definition, Legality, and Impact on Global Business Compliance

1. Facilitation Payments Explained: Definition, Legality, and Impact on Global Business Compliance In today’s global economy, ethical business practices are not just a matter of reputation — they’re a matter of legality. One of the most misunderstood and controversial topics in this space is facilitation payments. Often confused with bribery, these payments raise legal and ethical concerns, especially in international business environments where anti-corruption laws are tightening. This blog breaks down what facilitation payments are, their legal standing, and how they affect global corporate compliance programs and anti-bribery laws. What Are Facilitation Payments? Facilitation payments, sometimes referred to as "grease payments," are small payments made to government officials or agencies to expedite or secure the performance of a routine governmental action — something the official is already obligated to perform. These actions can include: ● Processing permits or licenses ● Customs clearance ● Providing police protection ● Mail delivery or utility services Unlike bribes, facilitation payments are not made to influence the outcome of a decision, but rather to speed up a standard process. Routine Governmental Action vs. Bribery What Counts as Routine Governmental Action? A routine governmental action is any action that is part of a public official’s normal duties and does not involve discretion. The payment is not for a favorable outcome — it's to ensure timely execution.

2. Examples include: ● Stamping already-approved documents ● Scheduling an inspection ● Turning on utilities for an approved project What Is Bribery Then? Bribery involves offering something of value to influence a public official's decision — such as securing an unfair advantage, winning a contract, or avoiding legal penalties. In short: ● Facilitation Payment: Speed up the inevitable ● Bribe: Influence the outcome Are Facilitation Payments Legal? Legality Varies by Jurisdiction In some countries, facilitation payments are legal under limited conditions. In others, they are outright illegal and fall under broader anti-bribery laws. United States – FCPA (Foreign Corrupt Practices Act) ● The FCPA allows facilitation payments if they are strictly for routine governmental actions. ● However, companies must record them accurately in financial statements. ● The payment must not influence the official’s decision-making authority.

3. ? United Kingdom – Bribery Act 2010 ● Under the UK Bribery Act, facilitation payments are illegal. ● No distinction is made between facilitation payments and bribes. Global Context Most countries, especially those that are members of the OECD Anti-Bribery Convention, discourage or criminalize facilitation payments. Enforcement varies, but the trend is toward banning them altogether. Impact on Corporate Compliance Program Building Strong Internal Controls Companies operating globally must establish a corporate compliance program that explicitly addresses facilitation payments. This includes: ● Creating clear internal policies ● Training employees on what qualifies as a facilitation payment ● Providing real-life scenarios to help them identify grey areas Record-Keeping and Transparency Even when legal, these payments must be transparently recorded in accounting systems to avoid violations of financial reporting standards. Risk of Reputational Damage Facilitation payments, while small, can still tarnish a company’s image. Investors, customers, and regulators increasingly demand ethical practices. The cost of a scandal — even a minor one — can be higher than the payment itself.

4. Anti-Bribery Laws and Global Enforcement What Are Anti-Bribery Laws? Anti-bribery laws prohibit offering, giving, receiving, or soliciting anything of value to influence an official’s actions. They are designed to promote transparency and fairness in business practices. Key Laws to Know: ● U.S. FCPA – Allows facilitation payments but mandates accurate record-keeping. ● UK Bribery Act – Prohibits all forms of facilitation payments. ● OECD Anti-Bribery Convention – A framework adopted by over 40 countries to combat bribery of foreign officials. Enforcement Is Increasing With rising global scrutiny of corruption in international business, authorities in many countries are collaborating to detect and penalize unethical payments. Companies with weak compliance frameworks risk legal consequences across multiple jurisdictions. Facilitation Payments in Corruption in International Business Facilitation payments contribute to systemic corruption in international business, even when they seem minor. The Slippery Slope ● A small payment here and there can normalize unethical practices. ● It creates an uneven playing field where only those willing to "grease the wheels" succeed. ● It fosters environments where government officials come to expect unofficial payments for standard duties.

5. Global Business Implications Multinational companies must align operations with the strictest standard of compliance to avoid penalties, especially in countries where enforcement is becoming aggressive. How to Handle Facilitation Payments in Business Operations 1.Avoid When Possible Opt for formal channels and processes. Explain to officials that your company has a zero-tolerance policy. 2.Train Employees Help them recognize situations where facilitation payments may be demanded and how to respond ethically. 3.Create Clear Policies Your corporate compliance program should detail: ○ What is considered a facilitation payment ○ Whether they are permitted or prohibited ○ Who to report incidents to 4.Report Internally Employees must feel comfortable reporting unethical behavior without fear of retaliation.

6. Conclusion: Understanding and Navigating Facilitation Payments in a High-Risk Business Environment Facilitation payments may appear to be harmless shortcuts in global commerce, but they exist in a legal and ethical grey area that’s becoming increasingly scrutinized. While some jurisdictions still permit such payments under narrow definitions, the international trend — driven by frameworks like the UK Bribery Act and the OECD Anti-Bribery Convention — is clearly moving toward full prohibition. For businesses operating across borders, especially those in high-risk industries such as CBD, vape, kratom, or adult services, the stakes are even higher. These sectors already face tighter regulatory scrutiny and require robust internal controls to remain compliant and operational. That’s why choosing the right payment provider is crucial — one that understands the nuances of international compliance, anti-bribery enforcement, and transparent transaction handling. Merchantech, a trusted name in high-risk payment processing services, empowers businesses to operate with full compliance and transparency. With advanced fraud prevention tools, transparent reporting, and an ethical-first approach to financial transactions, Merchantech helps you avoid legal missteps and reputational risks associated with facilitation payments or other grey-area financial practices.