The Foreign Extortion Prevention Act: Tackling the demand side of Bribery by foreign officials.

On December 14, 2023, the United States (US) Congress passed the National Defense Authorization Act (NDAA) for 2024. The act was signed by President Biden and became a US law on December 22. The act, more than 3K pages long, included multiple provisions affecting US national security.

Title LI: Judiciary Matters, Section 5101: “Prohibition of Demand for Bribe” introduced the Foreign Extortion Prevention Act or FEPA. This act amends the 18 U.S. Code related to domestic bribery, expands its applicability to “foreign officials,” and complements the Foreign Corrupt Practices Act (FCPA) of 1977. While the FCPA covers the offering and payment side of the corrupt act, the FEPA covers the demand side from a foreign officer.

Scope of the FEPA:

With FEPA, it becomes unlawful for a foreign officer, or a person selected to be a foreign officer 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,”

• From:

1. Any person while in the territory of the United States,

2. Any US issuer as defined by Section 3 (a) of the Securities Exchanges Act of 1934 covering companies registered pursuant to §15 U.S.C 78c (a)

3. Any US domestic concern as defined in section 104 of the FCPA, which includes:

• in return for influencing the performance of any official act by doing or omitting to-do any act in violation of the official duty,

• that confers any improper advantage in connection with obtaining or retaining business for or with, or directing business to, any person.

Any person violating the FEPA can be fined up to $250,000 or three (3X) times the monetary equivalent of the thing of value, imprisoned for not more than 15 years, or both.

Defining "Foreign official":

Under FEPA, foreign official designates:

1. Any official or employee of a foreign government or any department, agency, or instrumentality,

2. Any senior foreign political figure defined in section 1010.605 of title 31, Code of Federal Regulations (Anti-Money Laundering Regulation - AML). This includes any current or former:

   1. Senior official in the executive, legislative, administrative, military, or judicial branches of a foreign government (whether elected or not);

   2. Senior official of a major foreign political party; or

   3. Senior executive of a foreign government-owned corporation, business, or other entity that has been formed by, or for the benefit of, any such individual; an immediate family member of any such individual; and any person who is widely and publicly known to be a close associate of such individual.

3. Any official or employee of a public international organization, and

4. Any person acting in an unofficial capacity for or on behalf of a government, department, agency, or instrumentality described in subparagraph or a public international organization. This coverage expands the definition of foreign official remarkably compared to the FCPA, which applies to individuals acting under their official capacity for, or on behalf of, a government, department, agency, instrumentality, or a public international organization.

Potential Implications for organizations:

The particularly broad meaning of “unofficial capacity” might significantly impact the scope of the covered individuals working not only in the public administration and public sector but might also affect other organizations directed (by-law, fact or ownership) by a party considered as a foreign official. Also, employees working in entities controlled or directed (by-law, fact or ownership) by states or governmental agencies or in which management and/or employees may have special protected status, could make them to be potentially considered as public officials.

Moreover, the demand for a bribe doesn't need to be issued directly by the foreign official; the link might be established via an indirect responsibility, such as through a relationship of authority, of control, or of significant influence over the individual asking for a bribe.

Organizations operating in countries with state- or political-party-controlled economies might be particularly exposed to FEPA as their employees might be exposed to the risk of being or being perceived as foreign officials when dealing with a person located in the US, a US issuer or a US domestic concern.

Finally, organizations in numerous emerging markets and Western Europe might be exposed, considering the large number of employees working in previously state-owned/privatized companies and who might have preserved their civil servant status.

With FEPA, the US government is showing again how serious the issue of foreign corruption is to the US economy, its national security, and international competition. In the past, the US Department of Justice (DoJ) regularly enforced actions against bribery and extortion abroad, regardless of the side (demand or supply), using different tools such as the Magnitsky or AML-related acts and programs. With its extraterritorial reach, FEPA will facilitate the enforcement and prosecution of extortion acts from foreign officials, making it more straightforward.

Conclusion:

Although the UK Bribery Act of 2010 already made it an offense to pay and receive bribes for public and private businesses and is widely considered stricter than the US FCPA (and most other international laws on bribery), US laws and regulations should remain of top compliance priorities for organizations around the globe particularly if they employ individuals considered as public officials and dealing with a person located in the US, a US issuer or a US Domestic concern as part of their duties. Due to the exceptional capacities of the DOJ and other US law enforcement agencies in investigating, prosecuting, and enforcing actions far beyond the US borders, there is no doubt that FEPA will be part of the news in the fight against international corruption in the upcoming years.

Organizations, particularly those employing personnel that are or could be considered as public officials, should scrutinize their personnel to identify those critical to their activities and those exposed to dealing with a person located in the US, a US issuer or US Domestic concern, and mitigate the risk these critical resources being exposed to the FEPA prohibitions. Such response may include preventive and detective actions such as training, whistleblower hotline, segregation of duties, transaction scrutiny and data analytics to identify suspicious transactions, etc.

BAK Global Risk Management help organizations design and implement adequate fraud risk management programs to prevent, detect, and deter fraud, including bribery and corruption acts, at both demand and receipt side. We also provide assurance and fraud investigations services to organizations in the private, public, and non-profit sectors. To know more about our services, visit us at bak-grm.com and book your free consultation now.

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