It can take months for a new administration’s enforcement priorities come into focus, but recent Justice Department guidelines give a fair indication of where the Trump administration is heading with the Foreign Corrupt Practices Act (“FCPA”).
As many have already written, guidelines released on June 9 emphasize US national security, focus on conduct that unfairly disadvantages US businesses, and target bribery that supports cartels or transnational criminal organizations. They also shift focus from corporate to individual conduct.
The guidelines have crystallized the intent of President Trump’s February 10 Executive Order, which one can now read as repurposing the FCPA as a tool to advance US competitiveness, economic goals, and national security interests.
Impact on Business
The result is that US businesses with overseas interests – or foreign operations, investments, or partnerships – need to be vigilant and to thoroughly investigate the foreign companies and individuals with which they conduct or plan to conduct business.
This is especially true for companies in strategic sectors, which could include financial services, defense, aerospace, biotechnology, manufacturing, or extraction. Rare earth metals are a topical example, but it is hard to predict the next sector in which US national security and economic interests will meet. Prosecutors will likely focus on US companies with relationships in strategic countries, such as China, or in centers for drug cartels and transnational crime, such as Mexico, Venezuela, and the Balkans.
The focus on US economic interests suggests that, for example, a foreign company traded on a US exchange may be more likely to come under FCPA scrutiny than a US company listed overseas.
Recommendations
Successful companies investigate partners before they start doing business with them. This is especially true of companies in highly regulated industries or companies that interact frequently with foreign officials. The government’s shift in emphasis means many will have to re-evaluate their relationships.
The focus on cartels and transnational criminal organizations requires deeper investigative work. A company has to know not just the companies and individuals with which it is conducting business, but also the companies and individuals with which its partners are conducting business.
Companies that shirk this diligence run the risk of government scrutiny. They may end up defending an enforcement action while their executives face individual liability.
It will be essential to maintain a careful inventory of foreign suppliers, customers, and partners; to cross-check those relationships against the new enforcement priorities; and to seek outside help to clear red flags.
Companies also need to be familiar with the corporations and business entities identified by the US Treasury as cartels and transnational criminal organizations. The Treasury will likely expand these designations, which are made public in the Specially Designated Nationals List maintained by the Office of Foreign Assets Control.
Foreign Targets
One interesting aspect of the guidelines is how they highlight the Foreign Extortion Prevention Act (“FEPA”), a Biden administration law that criminalizes the solicitation of bribes by foreign officials. This is the flip side of the FCPA, which targets US companies and executives who pay bribes overseas.
In theory, FEPA could allow US authorities to charge foreign officials with a US crime, although, in practice, this depends on the willingness of foreign jurisdictions to cooperate with US courts over conduct that may not be illegal where it took place.
While it is early to say how the government will enforce FEPA, its inclusion in the recent guidelines speaks to the administration’s emphasis on US interests.
Conclusion
Many viewed the FCPA enforcement pause occasioned by President Trump’s February 10 Executive Order as a sign the administration was going to step back from enforcement. This does not appear to be the case, as indicated by the June 9 guidelines, which signal the administration wants to use the FCPA as a tool to advance US interests around the world. However, in so doing, it may have made the landscape more complex for US businesses with overseas relationships or interests.
