Facilitating Payment

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DEFINITION of 'Facilitating Payment'

A financial payment that may constitute a bribe and that is made with the intention of expediting an administrative process. A facilitating payment is a payment made to a public or government official that acts as 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, 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.

INVESTOPEDIA EXPLAINS 'Facilitating Payment'

Generally, facilitating payments are demanded by low-level, low-income officials in exchange for providing a service to which the payer is entitled 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 part of the 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 may be illustrated in the following scenario. Assume a business required a particular license or permit in order to operate. The company is entitled to the license or permit because it has met all the requirements. The business is otherwise poised to open its doors for business, but is legally bound to wait until the license or permit has been 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.
 

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