New Federal Legislation Criminalizes the “Demand Side” of Bribery (Foreign Corrupt Practices Act)
I. Introduction
Last month, the Foreign Extortion prevention Act ("FEPA" or the "Act"), as a part of the 2024 National Defense Authorization Act ("NDAA"), was passed in Congress with bipartisan support and signed into law by President Biden. [1]. FEPA is the first U.S. regulation intended to regulate the "demand side" of foreign bribery--creating a direct criminal statute against foreign officials who solicit or accept bribes from a company or individual in the U.S.
II. FCPA pre-FEPA
The Foreign Corrupt Practice Act, 5 U.S.C. §§ 78dd-1, et seq., ("FCPA") focuses solely on the "supply side" of foreign bribery--charging companies and individuals for offering, promising, authorizing, gifting, or paying bribes to foreign government officials.
Notably, the FCPA's reach was expressly limited in United States v. Hoskins, where the Second Circuit held that the FCPA does not extend extraterritorially over foreign official's actions outside of the U.S. [2]. As a result, enforcement of the "demand side" of a bribery, generally beyond the confines of the continental U.S., had to be achieved through other statutes.
FEPA bridges this gap by criminalizing the “demand side” of bribery. As such, where a U.S. company is in violation of the FCPA, it can be expected that a foreign official is in violation of FEPA.
III. FEPA
To remain distinct from the FCPA, FEPA expands 18 U.S.C. § 201, the statute for bribery of public officials and witnesses. Specifically, FEPA amends the statute to reach foreign officials. Establishing bribery by a foreign official as a criminal offense. With the enactment of FEPA, the U.S. joins other countries like France, the U.K., and Switzerland, regulating bribery outside of the countries' territory.
FEPA makes it a crime for foreign officials "to corruptly demand, seek, receive, accept, or agree to receive or accept, directly or indirectly, anything of value personally or for any other person or nongovernmental entity" in return for: "(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." [3].
The penalty for a FEPA violation is a fine no greater than $250,000 or 3 times the monetary equivalent of the thing of value, imprisoned for not more than 15 years, or both.
IV. Key Differences
FEPA explicitly states that it “shall not be construed as encompassing conduct that would violate” the FCPA, “whether pursuant to a theory of direct liability, conspiracy, complicity, or otherwise.” Therefore, while FEPA largely mirrors the FCPA, there are a few key differences:
FEPA is “subject to extraterritorial Federal jurisdiction,” addressing potentially the largest roadblock to enforcement under the FCPA. However, FEPA still requires a nexus with the U.S. Nexus is satisfied by the foreign officials conduct: in U.S. territory; with companies that are issuers under the Securities Exchange Act of 1934, 15 U.S.C. § 78c(a); or with those who have a domestic concern--including U.S. citizens, residents, and companies.
FEPA does not confer jurisdiction on the Securities and Exchange Commission ("SEC") for parallel civil enforcement authority like the FCPA.
FEPA's defines "foreign official" very broadly and beyond the FCPA's definition. FEPA expands the FCPA's definition of foreign official to include: persons "acting in an unofficial capacity;" any "senior foreign political figure," language from federal anti-money laundering regulations. However, FEPA does not apply to political candidates, like the FCPA.
FEPA requires the use of interstate commerce for any violation. While under the FCPA, interstate commerce need not be present if the conduct occurs in U.S. territory or if the company or person is a domestic concern.
Unlike the FCPA, conspiracy applies to the statute FEPA amends. Meaning, actors could be subject to liability for conspiracy to violate FEPA.
FEPA requires the U.S. Attorney General to submit an annual report to numerous congressional committees and publish on the website for the Department of Justice ("DOJ") summarizing: unlawful demands by foreign officials and foreign governments' efforts to prosecute said cases; the U.S. diplomatic efforts to protect U.S. companies and persons from foreign bribery and the effectiveness of said efforts; major actions taken under this section including enforcement actions and penalties; an evaluation of DOJ's effectiveness in enforcing the Act; and resources or legislative action DOJ needs to ensure adequate enforcement moving forward.
V. Potential Impact of the Statute on Companies and Individuals
Since the FEPA largely mirrors the FCPA, it is unclear if DOJ intends to use FEPA to investigate and prosecute new cases that were not viable under the FCPA, or to bolster DOJ's enforcement under the FCPA, by charging additional defendants like foreign officials. However, one can expect that the types of conduct investigated and prosecuted by DOJ will be similar. Moreover, it is unlikely that we will see civil enforcement actions against foreign officials since the Act does not confer jurisdiction on the SEC. The enforcement of FEPA is also expected to face the jurisdictional challenges one may expect--specifically, targeting the contemplated foreign officials who remain beyond the reach of U.S. courtrooms.
Companies and individuals should prepare for enforcement activity of both the FCPA and FEPA and adjust their compliance programs to address new areas of risk created by FEPA. Particularly, companies wholly or partly owned by foreign governments should assess these new risks as their employees qualify as “foreign officials” subject to FEPA prosecution. U.S. companies who do business with these entities should also have a heightened awareness moving forward.
While this remains to be seen in play, it is a safe assumption that the deliberate distinction between FEPA and the FCPA was intended to keep successful defenses to the FCPA from having the same deference over FEPA violations. Therefore, experienced counsel will be imperative to companies and individuals navigating the strategic considerations in response to FEPA on the compliance and defense level.
FNs
[2] See 902 F.3d 69, 97 (2018).
[3] https://www.congress.gov/bill/118th-congress/senate-bill/2347/text
