Foreign Extortion Prevention Act Criminalizes Bribery Demands by Foreign Officials

What Happened:

On December 22, 2023, President Biden signed the Foreign Extortion Prevention Act (FEPA) into law as part of the fiscal year 2024 National Defense Authorization Act. Although bribery always requires a giver and a receiver, US anti-corruption efforts have traditionally focused almost exclusively on those who pay bribes because of the way the Foreign Corrupt Practices Act (FCPA) is written. The FCPA criminalizes the act of giving bribes to foreign government officials, but until now, the US has not had a statute that criminalized the receipt of bribes by foreign government officials. The FEPA will now complement the FCPA by criminalizing demand-side bribery by foreign officials.

The Bottom Line:

Whereas the FCPA criminalizes only the “supply” side of illegal foreign bribery—the offering or payment of bribes to foreign government officials—the FEPA legislation now criminalizes the “demand” side of foreign bribery by making it illegal for any foreign government official to demand, receive, or agree to receive a bribe from a United States citizen, company, or resident in exchange for obtaining business. Specifically, the law’s prohibitions extend to any of the following conduct by a foreign official: “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, by making use of the mails or any means or instrumentality of interstate commerce.” On the supply side, then, are the “bribers”: the givers, offerors, or payors of bribes or anything of value; on the demand side are the “receivers”: the foreign government officials who demand, seek, accept or receive any such bribe. Both “briber” and “receiver” are now subject to criminal prosecution under US law.

The FEPA aims to level the international playing field for US companies by giving them a means to respond to bribery demands from foreign officials by emphasizing that, under the FEPA, both the “briber” company and the “receiver” foreign government official could now face criminal exposure for the bribe.

The Full Story:

The FEPA amends the US domestic bribery statutes codified under 18 USC. § 201 to now include “foreign official” in the definition. The new definition includes not only “any official or employee of a foreign government or any department, agency, or instrumentality thereof” but also any person “acting in an unofficial capacity” on behalf of or with the authority of those entities; this new definition of “public official” is therefore even broader than the definition in the FCPA.

While the FEPA notes that it does not criminalize conduct that would violate section 30A of the Securities Exchange Act of 1934 or sections 104 or 104A of the FCPA, “whether pursuant to a theory of direct liability, conspiracy, complicity, or otherwise,” it nonetheless mimics certain elements of the FCPA’s prohibitions against foreign corruption. For instance, the FEPA requires the same jurisdictional nexus to the US by criminalizing corrupt demands by foreign officials if made of a US issuer, a US domestic concern or any person in the territory of the United States.

Similarly, much like the FCPA, the FEPA requires a quid pro quo, namely, that an official’s demand of a thing of value be made in return for: “being influenced in the performance of any official act;” “being induced to do or omit to do any act in violation of the official duty of such foreign official or person”; or “conferring any improper advantage, in connection with obtaining or retaining business for or with, or directing business to, any person.”

Violations of the FEPA carry a potential penalty of a fine of up to $250,000 or three times the amount of the bribe (note that the FCPA caps the penalty at twice the bribe) and imprisonment of up to 15 years.

Potential Impact:

The FEPA’s criminalization of the demand-side of bribery fixes a gap in coverage in the US anti-corruption regime. Until now, US enforcement authorities have primarily used the FCPA to combat foreign corruption, but the language of the FCPA left the recipients of foreign bribes outside of its scope. In the interim, enforcement authorities have cobbled together charges under federal money laundering, tax, and wire fraud statutes to prosecute the beneficiaries of bribery overseas.

Additionally, the FEPA will likely have significant consequences for US businesses. Among other things, it will give companies an additional tool to resist improper bribery demands; companies can now point out to the foreign official demanding the bribe that the official himself is now subject to prosecution under the FEPA in the same way the company would be for paying the bribe.

The FEPA may also help companies under investigation for FCPA violations by allowing them to argue that they were the victims of extortion rather than willing bribe payers—and that the US government should prosecute the foreign official who demanded the bribe instead. New opportunities for cooperation by US companies and individuals will also arise. On the other hand, FEPA investigations by the US government will likely generate more information about the supply side of the same transactions and increase the risk of FCPA charges for the same activity. Therefore, the FEPA will also potentially put US companies at a greater risk of FCPA prosecutions. And, given the DOJ’s recent emphasis on the importance of effective corporate compliance programs in preventing, detecting, and mitigating risks from compliance violations, companies will now need to consider what changes and additional training they need to do with respect to their compliance programs.

Given the new enforcement option that the FEPA provides to US enforcement agencies, companies should ensure their anti-bribery & anti-corruption (ABAC) compliance programs are up to date and include, at a minimum:

• Clear, written anti-corruption policies and procedures that prohibit the offering or receiving of bribes and that explain the new, broader definition of “foreign official” under the FEPA;
• ABAC training for compliance personnel and any employees who may interact with “foreign officials” to provide them with updates on the FEPA; and
• Internal investigation policies, procedures, and reporting mechanisms that identify ABAC red flags and allow companies to investigate potential corrupt conduct, mitigate and remediate any findings, and disclose the conduct to the government when necessary.

Companies should also monitor for additional government guidance regarding the FEPA.

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Hunton Andrews Kurth LLP will continue to monitor the development of this and other ABAC matters. Our attorneys have experience providing advice and counsel for  clients developing and administering compliance programs as described above. We also guide clients on investigating, advising, and remediating compliance risks when they do arise. Please contact us if you have any questions or would like further information regarding these new developments or other questions related to enforcement actions or effective compliance and risk mitigation measures.