Gift giving is a way of business in China. Paying the proper amount of respect, mianzi, is essential to getting deals done. However, when does a gift become a bribe?

Thousands of American investors are asking themselves that question, fearful of violating a Cold War-era law aimed at fighting foreign corruption and establishing the U.S. as the champion of the "Free World". The Foreign Corrupt Practices Act (FCPA) is designed to crack down on bribery overseas, and the fines levied on violators go into the pockets of the U.S. Treasury—making it a lucrative law to enforce.

A recent panel at Fordham University School of Law, sponsored by the Chinese Business Lawyers Association, convened to discuss to specific risk the FCPA poses for companies and law firms doing business in China. The country's penchant for gift giving, and the prevalence of government-owned enterprises, make China a target for FCPA investment, said moderator and Fordham professor Sean Griffith.

"State-owned enterprises can qualify as an instrument of the government," Griffith said, and the FCPA specifically prohibits payments to "foreign officials"—a nebulous term that could mean even mid-level Chinese executives.

The second area of risk lies in that the FCPA considers payments "anything of value," which can include free training at U.S. universities, sightseeing trips for officials and their families and jobs for the children of influential executives.

"Most people in China would think there is nothing wrong with that," Griffith said.

There is another area of risk that is often overlooked, said panelist Daniel Chow, a professor of law at Ohio State University. Money and gifts paid by third parties and business partners are attributable to multinational companies. These are called "pass-through payments."

When companies run afoul of the law, such as Ralph Lauren in Argentina, the FCPA has a sanctioning effect in that companies decide to move operations rather than risk further violations. That isn't possible in China. Companies simply cannot afford to miss out on the opportunity China presents, Griffith said.

Policy of enforcement

Panelist Nathaniel Edmonds, partner at law firm Paul Hastings and a former Assistant Chief of the Foreign Corrupt Practices Act Unit of the Fraud Section under the Department of Justice, spent years investigating and prosecuting companies for violating the FCPA. According to the World Bank, $100 million is paid in bribes around the world every hour for an estimated $1 trillion a year. A "staggering amount," Edmonds said. While the U.S. is the leading regulator of worldwide corruption, that may not always be the case.

"There has been a long push to have the U.S. not the only enforcer of foreign bribery law," he said. U.S. officials share best practices and enforcement techniques because they believe corruption has a negative economic effect and undermines stability.

"Most companies have learned to avoid the big bribes, but the gray areas are a little harder—like third parties or family hires. Gifts are expected as a part of traditional Chinese culture," Edmonds said.

Technology has made it easier than ever for U.S. officials to enforce the FCPA, he added, and can reveal present and past violations,

"The world is flat. Information is shared and dynamics are changing. Companies have tremendous opportunity and tremendous risk," Edmonds said.

Though the number of cases prosecuted under the FCPA has declined in recent years, several high-profile violations prove that U.S. regulators are still keen to prosecute, warned panelist Thomas Gorman, partner at Dorsey & Whitney, LLP and co-chair of the firm's Anticorruption and FCPA practice group. For example, Alcoa paid $384 million in January 2014, Weatherford paid $152 million in November 2013, and French company Total paid $398 million in May 2013.

"I would suggest the new era of FCPA enforcement is ongoing," Gorman said.

Minimizing risk

It is difficult for U.S. companies to safeguard themselves completely against violating the FCPA, but there has been a move toward self-reporting and increased cooperation in order to mitigate and reduce the fines levied by the U.S. government. For example, U.S. company Diebold reported its own violation of the FCPA, and was given good credit.

"Compliance is not a defense, but is critical to mitigation," Gorman said. There is no use arguing, he added, companies should take the point of view that they may not do business in the manner they are used to.

" 'Everyone does it' is not a valid excuse," warned U.S. Circuit Judge Denny Chin, in his closing remarks. "Why does the U.S. care? It cares very much about rule of law. Corruption undermines the rule of law. The world is becoming smaller and the U.S. wants the global playing field to be level."

The author is a contributing writer to Beijing Review, living in New York City