HISTORY:
The Foreign Extortion Prevention Act (FEPA), signed into law in December of 2023, marks a significant development in the fight against international corruption. FEPA aims to bridge an existing gap in the Foreign Corrupt Practices Act (FCPA), which does not prohibit the demand side of bribery.
The FCPA, first promulgated in 1977, target the supply side of bribery. In other words, it targets individuals and companies that offer bribes to “Foreign Officials”. Legislative intent included the principle of levelling the playing field for US businesses operating globally. US enforcement agencies have interpreted the US nexus requirement broadly; as a result (and potentially in line with legislative intent), the majority of FCPA settlements involve foreign (i.e., non-US) persons.
However, the FCPA is silent vis-à-vis the demand side, i.e., the Foreign Officials asking for bribes. According to sources, this was done to avoid the diplomatic tension generated from US prosecutions of foreign officials. But…almost half a century later, the FEPA now criminalizes such behavior.
KEY PROVISIONS:
- Jurisdiction: FEPA applies extraterritorially but requires a U.S. connection, such as involvement of U.S. persons or companies, or use of the U.S. financial system.
- Definition of Foreign Officials: This definition expands beyond the FCPA to include those acting in both official and unofficial capacities, and senior foreign political figures.
- The Crime: “to corruptly demand, seek, receive, accept, or agree to receive or accept, directly or indirectly, anything of value” from any US issuer or domestic concern, or from any person while in the territory of the United States, while: (a) being influenced in the performance of any official act; (b) being induced to do, or omit to do, any act in violation of the official duty of such foreign official or person; or (c) conferring any improper advantage, in connection with obtaining or retaining business for or with, or directing business to, any person.
- Penalties: Violators can face up to 15 years in prison and fines up to $250,000, or three times the bribe amount, whichever is greater.
- Victims of Kleptocracy Fund: Fines and penalties for FEPA violations go into this fund, which supports anti-corruption initiatives.
POTENTIAL IMPACT:
The Department of Justice will approach handling FEPA cases the same way it handles FCPA cases: centralized supervision by the Fraud Section and in collaboration with U.S. Attorney’s Offices. So…is FEPA a sea change in enforcement? No.
- For decades, the US has pursued demand-side bribery through money laundering and wire fraud statutes.
- The new law does not criminalize any conduct already covered by FCPA.
As a result, its standalone impact against bribe takers is predicted to be limited. Among other things, it may be simply included as an additional threatened offense in prosecutions.
On the other hand, corporate compliance programs will want to double-down on training and controls: a bribe taker who cooperates may undermine a bribe maker’s claims of voluntary self-disclosure disclosure and full cooperation.
SOME BEST PRACTICES FOR CORPORATIONS:
- Policy Revisions: Anti-corruption policies, third party due diligence policies and procedures, and related guidelines may need to be updated to reflect the new, broader definition of “Foreign Officials”.
- Training: Staff interacting with “Foreign Officials” will need additional training to understand and comply with FEPA requirements.
- Due Diligence: Heightened scrutiny of third-party transactions involving “Foreign Officials” and their related parties will be crucial.
- Prompt Investigation: any substantiated report should be managed quickly and efficiently, so that the company beats the bribe taker to the disclosure table.
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