A recent executive order (EO) and Department of Justice (DOJ) policy statement issued in the first weeks of February signal a potentially dramatic shift in the DOJ's approach to enforcing the Foreign Corrupt Practices Act (FCPA) under the Trump administration.
This shift is raising many questions for multinational corporations that have invested substantial resources in FCPA compliance programs designed to prevent and detect overseas bribery activity within their organizations, as well as certain high-risk third-party organizations with whom they transact. Are such programs still necessary in this newly emerging FCPA enforcement landscape, or should companies shift their resources elsewhere?
A New Approach to FCPA Enforcement?
The FCPA prohibits certain persons and entities from making payments to foreign officials in exchange for obtaining or retaining a business advantage. It has long served as the DOJ's primary tool for prosecuting U.S. corporations, as well as foreign corporations whose securities are listed in the United States, accused of paying bribes overseas.
While the FCPA has been on the books since the 1970s, the DOJ has opened FCPA investigations with particular frequency over the last 20 years—as the economy has become increasingly globalized—resulting in billions of dollars in monetary penalties imposed against some of the world's largest multinational corporations.
But this could soon change. Based on the EO and DOJ policy statement (the Bondi Memorandum), the Trump administration appears to view past FCPA efforts as overzealous and unpredictable, resulting in unfair disadvantages to U.S. businesses competing in foreign markets. The announcements suggest that going forward, the DOJ will scale back its use of the FCPA to prosecute companies accused of paying bribes to foreign officials and instead use it to target Transnational Criminal Organizations (TCOs), such as drug cartels.
The Executive Order: Pause, Review, and Reassess
On February 10, the White House issued an executive order entitled "Pausing Foreign Corrupt Practices Act Enforcement to Further American Economic and National Security." The EO explains that "[c]urrent FCPA enforcement impedes the United States' foreign policy objectives," "wastes limited prosecutorial resources that could be dedicated to preserving American freedoms," and "actively harms American economic competitiveness and, therefore, national security." Among other things, the EO provides the Attorney General 180 days to:
- Review the DOJ's pending FCPA investigations and enforcement actions and "take appropriate action . . . to restore proper bounds on FCPA enforcement" in keeping with the president's "foreign policy prerogatives."
- Review and update DOJ's current FCPA guidelines and policies to ensure that they "adequately promote [Presidential] authority to conduct foreign affairs and prioritize American interests."
During this six-month window, the EO further prohibits the initiation of any new FCPA investigations and enforcement actions without an exception from the Attorney General.
The Bondi Memo: Targeting Cartels, Not Companies
Attorney General Pam Bondi's February 5 memorandum—issued five days before the EO—adds further contours to the DOJ's plans. There, the Attorney General directs federal prosecutors to "prioritize [FCPA] investigations related to foreign bribery that facilitates the criminal operations of Cartels and TCOs," including "bribery of foreign officials to facilitate human smuggling and the trafficking of narcotics and firearms." Notably, it "suspend[s]" the DOJ Manual requirement for "authorization by the Criminal Division for an [FCPA] investigation or prosecution" and its condition "that such investigations and prosecutions be conducted by trial attorneys of the [DOJ] Fraud Section."
Local U.S. Attorney's offices now must only provide the FCPA Unit "with 24 hours' advance notice" of its investigation and "make available . . . any existing memoranda related to the contemplated charges."
What Comes Next and What It Means for You
Corporate clients with international footprints may understandably ask what, if anything, these announcements mean for them and their business practices. First, remember that much remains to be seen, including the DOJ's forthcoming revisions to its FCPA guidelines and policies called for under the EO. Although we expect they will align with the priorities described above, they will also likely give further clues about what to expect over the next four years. In the meantime, our observations below may be helpful in navigating this changing terrain.
The FCPA Is Still the Law of the Land
Neither the EO nor the Bondi Memorandum legalize foreign bribery or peel back the FCPA's books-and-records requirements. Indeed, portions of them seem aimed at reducing the DOJ's internal processes to facilitate even greater enforcement efforts where they touch prioritized issues. And the EO's "pause" on new investigations still permits exceptions where the AG deems it appropriate.
Enforcement Priorities Change Over Time
Just as this administration has chosen to focus its efforts on certain areas, so too will the next. The operative statutes of limitations for FCPA crimes are typically five or six years, which leaves plenty of time for the DOJ to refocus its attention on foreign bribery occurring under the newly announced paradigm. And where the misconduct involves an ongoing scheme—such as recurring payments to a foreign official—the statute of limitation may be extended.
The SEC Has Not Weighed In
The SEC holds civil FCPA enforcement authority over companies listed on U.S. exchanges and traditionally has been the primary enforcer of the FCPA's accounting provisions (i.e., books and records and internal controls). The SEC has not yet issued any new guidance or modifications to its FCPA enforcement practices, but it may be forthcoming.
Non-U.S. Enforcement Authorities May Fill the Void
Through its history of FCPA investigations and enforcement, the U.S. has led the world in prosecuting international corruption cases. However, many foreign countries in which U.S. companies are most active have strong anti-bribery laws of their own, including the U.K.'s Bribery Act of 2010 and Germany's Anti-Bribery and Anti-Corruption laws. Brazil, France, and South Korea also have robust legal mechanisms and agencies assigned to investigate and address this conduct. These and other nations may step up their anti-corruption enforcement efforts to fill a perceived void on cases that fall outside the DOJ's priority list.
Foreign Companies May Be Treated Differently
As set out above, the EO's primary concern with past FCPA enforcement efforts was their impact on U.S. companies' competitiveness in foreign markets and their threat to national security. However, the FCPA also reaches extraterritorial conduct of foreign companies listed on U.S. exchanges, as well as all foreign companies that cause, directly or through agents, corrupt payments to be made within U.S. territory. Continuing to vigorously enforce the FCPA against foreign companies would not seem to implicate the economic competitiveness and national security concerns raised in the EO. Thus, it is possible that the new enforcement landscape could entail a presumption against bringing FCPA charges against U.S. corporations while maintaining the current approach to non-U.S. companies.
Takeaways: What to Do Now
Only time will tell how significantly the DOJ will shift its FCPA efforts and exactly what that will mean for companies doing business around the world. But for all the reasons discussed above, we caution those clients not to construe the EO or Bondi Memorandum as a sign that the DOJ plans to ignore bribery of foreign officials. If your compliance programs are already robust, maintain them; if they need further attention, press ahead with those efforts. The future of your company will thank you—whether in 180 days, four years, or beyond.
If you have questions about how changes in FCPA enforcement could impact your organization, contact the authors or any member of Venable's Investigations and White Collar Defense team.