Airbnb Has Dodged FCPA Charges For Now — What About Sanctions?
Airbnb is available in over 80,000 cities in 190 countries around the world. And despite being such a prolific enterprise, it’s also universally despised by authorities at all levels of government. In holiday hotspots around the world with a shaky rule of law, like Thailand and Indonesia, Airbnb is banned. But it still operates — seemingly without impunity. And how does it do this? The company identifies potential avenues in its S-1 filing by hinting at possible violations of the Foreign Corrupt Practices Act (FCPA), a strict American law that prohibits companies from engaging in bribery abroad.
Did Airbnb Violate the FCPA?
The FCPA is a US law passed in the late 1970s that prevents US-registered firms, or an officer, shareholder or intermediary of one from bribing officials in foreign countries. Given that bribery is a norm in many parts of the world, lawmakers in the US didn’t want companies from their country lowering themselves to this standard. At the same time, if corruption-prone nations wanted US investment they would need to clean up their act and stamp out bribery and corruption. Critics, however, say that the law is "extraterritorial, vicarious, punitive, and vague." In many countries the line between bribery and lobbying is ambiguous, and the inherent vagueness of the legislation would deter American companies from investing abroad.
One surprise, although should have been predictable, is that like Uber, Airbnb has huge FCPA and payments compliance risk. Lots of AML and forex complexity. Worth looking into who/how pmts processed given Wirecard. Disclosure: I've never used Airbnb. I am @MarriottBonvoy loyal.
— Francine McKenna (@retheauditors) December 1, 2020
So how about Airbnb? Airbnb hasn’t disclosed that it has directly bribed any foreign governments. The note in its S-1 filing is a warning; it says that by the nature of its business its intermediaries on the ground in countries around the world might have to engage in bribery to ensure the continuity of its business operations. After all, Airbnb has been aggressively lobbying local governments around the US in order to shape laws in its favor. What might that lobbying look like abroad?
Though we don’t have any proof that Airbnb has violated FCPA its closest peer in the sharing economy, Uber, has come closer to doing this. In early 2019, as part of its S-1 filing, the company disclosed that it was under investigation for FCPA violations for potential bribes in Indonesia, Malaysia, China, and India. However, in early-2020 Uber received notice from the Department of Justice that the investigation was closed and there will be no charges pressed.
But Airbnb Does Have a Sanctions Compliance Problem
Part of doing business in virtually every country in the world means doing business in countries that are subject to US sanctions. While a US company isn’t allowed to do business in say, Cuba or Belarus (with very limited exceptions) you can book an Airbnb there.
In Airbnb’s S-1, the company said it had been in contact with the office of Foreign Assets Control (OFAC) to discuss this. Airbnb said in the filing that about 1,000 new hosts in Cuba offered private homestays in 2015 during a period when some sanctions were eased.
“OFAC’s review of our voluntary self-disclosure regarding Cuba is ongoing and we remain in close contact with OFAC,” Airbnb said in its disclosure. “Depending upon OFAC’s assessment of the Cuba review, we could be subject to potentially significant monetary civil penalties and litigation, and our brand and reputation could be materially adversely affected.”
The company also indicated it had received some interest about its business in the Crimea region of Ukraine which has been under US sanction since 2014. In October 2020, OFAC further issued to Airbnb “cautionary letters and a no-action letter, and no administrative penalties, with respect to the disclosed matters involving [Crimea],” according to the company filing.
Airbnb also noted that its Anti-Money Laundering compliance requirements are “complex” given the volume of transactions in different currencies.
Airbnb’s IPO is expected in mid-December.