Foreign Extortion Prevention Act: US Tackles Demand-Side Bribery

There has long been a disconnect between punishment for paying a foreign bribe and punishment for taking a foreign bribe. After all, the nature of foreign bribery is that it straddles multiple legal systems. Laws, evidentiary standards, and statutes of limitations differ from jurisdiction to jurisdiction, which makes it difficult to ensure that all parties to a bribe are held accountable.

An OECD survey conducted in 2017 sought to investigate the outcomes for local officials implicated when a foreign company or individual was sanctioned for paying bribes. The researchers reached out to local officials seeing information about 55 cases where a foreign company or individual was punished for paying bribes; they received responses regarding 43 of those cases. Of those 43, there were only 11 cases in which one or more local officials were criminally punished for taking bribes. In another 11 cases, criminal investigations or proceedings remained pending.

In the US, the Foreign Corrupt Practices Act (FCPA) allows for enforcement actions against bribe payers with a US nexus; however, the FCPA does not apply to foreign bribe takers. US prosecutors have generally relied on money laundering statutes to prosecute foreign government officials who take bribes (e.g. Carlos Polit, Claudia Díaz, and Arturo Murillo). However, in December 2023, Congress passed the Foreign Extortion Prevention Act (FEPA)(Section 5101 of the National Defense Authorization Act) to remedy the disparity in demand side bribery enforcement. Intended as a complement to the FCPA, FEPA allows for the prosecution of foreign officials who solicit and/or receive bribes from US persons, US companies, or any other persons in US territory.

As originally passed, FEPA will expand the definition of “Foreign Official” beyond the standard set down in the FCPA, broadening it to include not only officers, employees, and individuals acting in an official capacity on the behalf of foreign governments or public international organizations, but also any person working in an unofficial capacity for foreign governments and public international organizations.

It also added “senior foreign political figures” as defined in anti-money laundering regulations – these include current and former government officials, foreign political party leaders, senior executives of foreign state-owned entities, and the spouses, parents, siblings, children and in-laws of those individuals.

Subsequent revisions in July 2024 removed the “unofficial capacity” language but added other language to include persons “selected to be a foreign official” (i.e., newly elected or appointed officials who have not yet taken office) as well as persons working on behalf of foreign officials or those selected to be foreign officials. 

The revisions also tweaked jurisdictional reach for some categories of bribes. While liability for bribes paid by US persons or companies and US issuers remains global, bribes paid by other persons are only criminalized while the foreign official (or person acting on their behalf) is located in the territory of the United States. This appears to invert the previous language, which criminalized instances where the non-US bribe payor was in the US, but not the bribe taker.

While we have not yet identified any instances of charges being brought under FEPA, reporting obligations relating to possible FEPA violations have been included in recent deferred prosecution agreements (DPAs) of companies seeking to settle FCPA charges. 

The DPAs for both Raytheon Company/RTX Corporation (filed in October 2024) and McKinsey and Company Africa (Pty) Ltd/McKinsey & Company, Inc. (filed in December 2024) require those entities to promptly report any evidence or allegations of FEPA allegations they learn of to the pertinent US Attorney’s Office.

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While we may not have seen any FEPA cases prosecuted to date, it would be unreasonable to assume that trend will hold. FEPA cases are now being handled by the Department of Justice’s Criminal Fraud Section, the same unit that handles FCPA cases; it would not be surprising to see future foreign bribery cases include parallel FCPA and FEPA charges on the supply and demand sides. Additionally, the US Department of Justice recently announced that it was including FEPA violations in a new whistleblower program, suggesting they are serious about enforcement.

While FEPA does not explicitly mention corporate liability for foreign bribes, companies would do well to consider the implications of FEPA’s expanded definition of foreign officials and to assess whether their existing compliance and monitoring programs are sufficient. Companies would also be advised to keep tabs on the annual public reporting that the law mandates and keep an eye out for any additional guidance that the department may publish.