The FCPA Executive Order: What to Expect and Why Compliance Still Matters

Among the flurry of activity undertaken by the Trump administration since taking office was an executive order issued in February that temporarily “paused” enforcement of the Foreign Corrupt Practices Act, a U.S. federal law that prohibits the bribery of foreign officials, pending the issuance of revised enforcement guidelines by the Justice Department.

Citing the president’s foreign policy authority and national security interests, the executive order directs the DOJ to refrain from opening any new FCPA investigations and to review pending FCPA investigations for up to six months while the DOJ considers and issues updated guidance that gives priority to “American economic and security interests.”

That directive has left many people asking what future enforcement of the FCPA will look like and what types of foreign bribery cases the DOJ will investigate and prosecute going forward

What to expect

The short answer is that it is difficult to predict exactly how this will play out. The revised guidance will certainly provide answers and clarity, as will any enforcement actions brought by the DOJ in the coming year. It is also likely that U.S. companies may stand to benefit the most from the temporary pause on FCPA enforcement and upcoming revised guidance, given the policy interests highlighted in the executive order.

By the same token, however, it is highly unlikely that U.S. companies will see this as an invitation to engage in unfettered bribery abroad, as the risks of doing so still remain substantial, irrespective of the level of DOJ enforcement.

Most companies also recognize that the best way to level the playing field is by having enforcement that targets competitors that are paying bribes to foreign officials in the countries in which they are operating and the corrupt foreign officials who are demanding the bribes. That is an approach the Trump DOJ may incorporate into its upcoming guidance to better position U.S. companies and afford them with increased economic competitiveness.

In this regard, the DOJ may pursue investigations against companies that have used corrupt practices to steal opportunities from U.S. companies operating overseas—for example, by paying bribes to win contracts through direct competition against U.S. companies or to obtain other advantages over U.S. companies operating in the same market.

‘America First’

In light of the Trump administration’s goal of giving priority to “America First,” the new framework for FCPA enforcement may steer the DOJ to focus its enforcement efforts on non-

U. S. companies for the foreseeable future, especially foreign companies operating in industries and regions the administration sees as a threat to national security or to U.S. economic interests.

Historically, a significant subset of FCPA matters have involved non-U. S. companies each year. Even just looking at the past few years alone, approximately 50-60% of all corporate FCPA resolutions involved foreign companies year-over-year. In fact, nine of the 10 largest FCPA cases in history have been against non-U. S. companies, resulting in billions of dollars in penalties paid to the U.S. Treasury.

Focus on corrupt officials, cartels and criminal organizations

The DOJ also may increase its focus on the investigation and prosecution of corrupt foreign officials who extort law-abiding U.S. companies and are otherwise permissive of the exact type of cartels and transnational criminal organizations the Trump administration has expressed interest in eliminating. This would be consistent with the recent policy memorandum issued by Attorney General Pamela Bondi giving priority to foreign bribery investigations that relate to cartels and TCOs.

As part of this approach, the DOJ might look to deploy the newly enacted Foreign Extortion Prevention Act as a tool focused on the “demand side” of foreign bribery—i.e., the corrupt officials who solicit bribes and threaten U.S. economic interests and national security.

Companies operating in countries in which cartels and TCOs have a significant presence should be particularly attuned and focused on potential risks in those areas. This may be particularly challenging, given that TCOs operate on virtually every continent and are often closely tied to corrupt officials. In fact, the same corrupt officials who facilitate the operations of criminal organizations are often the same foreign officials who solicit and demand bribes from companies in exchange for lucrative contracts and other business advantages.

Future enforcement under the FCPA and FEPA also may intersect with the State Department’s designation of a number of cartels and TCOs as Foreign Terrorist Organizations and Specially Designated Global Terrorists on Feb. 20. As a result of these designations, payments or other forms of assistance made to these FTOs or affiliated individuals—even under implicit threat—could potentially subject businesses to criminal and civil liability in the U.S.

As cartels and TCOs frequently use seemingly legitimate businesses as a means of facilitating their operations or as fronts for money laundering and other activities, it is critically important that companies engage in thorough due diligence and robust third-party and know-your-customer procedures.

Why compliance remains highly relevant and important

Given the uncertainty and questions that remain open pending issuance of further guidance from the DOJ, companies should hold off taking any drastic steps in the wake of the FCPA executive order. Above all, companies should remain focused on maintaining good, effective compliance programs, regardless of whether they are U.S.-based or not.

First, as a threshold matter, the FCPA remains an enforceable, federal criminal law on the books in the U.S.

Second, it bears keeping in mind that enforcement priorities can shift again in the future, either under this administration or the next one, so taking any unnecessary risks based on the hope that enforcement may decrease or otherwise focus attention elsewhere isn’t an advisable strategy.

Third, the statute of limitations on FCPA violations is five years (and potentially even longer with tolling or if charged as part of a conspiracy), which means that any misconduct identified today could be subject to investigation and charging far into the future.

Fourth, the DOJ and other agencies also regularly investigate other federal laws in cross- border matters, including money laundering, wire fraud and sanctions-related offenses, all of which remain on the table and subject to potential future enforcement as well.

Finally, the risk of potential investigation and enforcement by foreign authorities remains a very real possibility. Many foreign authorities use similar anticorruption laws and have significantly increased their enforcement activity in recent years—and may be even more eager to do so going forward if the DOJ shows a reduced focus on U.S. companies. Very recently, authorities in the U.K., France and Switzerland announced the formation of a new anticorruption task force aimed at strengthening collaboration and cooperation in anticorruption investigations and noting the potential for expansion to include additional authorities from other countries.

Maintaining an effective compliance program is still very relevant and important for any company, as it protects the company and its employees by ensuring ethical conduct and appropriate business practices.

Conducting internal investigations after identifying potential misconduct remains equally important, so that companies can understand the full scope of misconduct allegations when they arise and prevent smaller issues from growing into larger, more significant problems in the future by identifying the root cause and appropriately remediating them.

Most companies also understand that good compliance allows earlier detection and remediation of other illegal conduct that directly harms the company, such as embezzlement or fraud. Good compliance also helps insulate the company against the risk of potential collateral civil litigation, including shareholder lawsuits and other claims based on contractual representations and warranties in merger and acquisition deals, joint ventures and note issuances regarding compliance with anticorruption and other laws.

Finally, most companies appreciate the amount of effort and investment required to generate and maintain a culture of compliance among employees, and that it can be difficult to get that back at a later time if there are drastic cuts, changes or other messaging that calls into question the company’s dedication to compliance.

All to say, whatever may be the impact of the executive order and the temporary pause on FCPA enforcement, it doesn’t mean that allegations of misconduct should be ignored or that compliance should be deprioritized. Companies should remain focused on maintaining the effectiveness of their existing compliance programs and investigating alleged misconduct as appropriate.

This article was originally published by Dow Jones Risk Journal and has been reproduced with permission.