Understanding the Foreign Extortion Prevention Act

On January 1, 2024, the U.S. Congress enacted the Foreign Extortion Prevention Act (FEPA), a law that “criminalizes the demand side of foreign bribery by prohibiting foreign officials from demanding, seeking, receiving, accepting, or agreeing to receive or accept anything of value from certain individuals and entities.”¹ The law closes the gap with bribery and further brings the U.S. more in line with countries such as the U.K., France and Switzerland that already target the supply-and-demand sides of bribery.

Anti-financial crime (AFC) professionals must understand the key components of this law and its applicability to their organizations to ensure compliance under the U.S. Department of Justice’s (DOJ) enforcement.

Background

Since 1977, the Foreign Corrupt Practices Act (FCPA) has prohibited U.S. citizens and entities from influencing foreign public officials with any form of personal payments or rewards. However, this law was limited to the supply side of bribery (i.e., those offering the bribes), preventing the U.S. from holding the bribe-takers accountable.

In recent years, the strain of bribery and corruption on U.S. companies operating internationally, particularly in developing regions, has led to public and private support for a law to deter foreign officials and protect U.S. citizens and companies. Signs of a law being implemented were seen as early as June 2021 in the “Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest” where corruption was labeled a core national security interest.² At the same time, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network released its first-ever national “Anti-Money Laundering/Countering the Financing of Terrorism Priorities,” listing corruption as one of the eight “most significant threats currently facing the United States.”³

Building off these announcements, the White House released its December 2021 report on countering corruption when describing strategic objective 3.2 to update tools available to hold corrupt actors accountable at home and abroad, including the “demand side of bribery.”⁴ Washington’s resolution to combat corruption was once again highlighted in the White House’s 2022 National Security Strategy.⁵

What Is Net New?

Intended to complement one another, FCPA and FEPA do have differences other than the supply versus demand focus. Notably, FEPA’s definition of a foreign official includes individuals acting in an “unofficial” capacity. Further, while FCPA lists an exception for a “facilitation” payments exception, FEPA makes no such reference.⁶

Enacting this law also requires reporting its implementation and effectiveness. DOJ must report to Congress no later than January 1, 2025, along with annual data on mutual legal assistance requests made to the U.S.

Benefits and Challenges

Acting as a deterrent, individuals and organizations now have a means to protect themselves against bribery solicitation by foreign officials, who, at a minimum, face the risk of being named-and-shamed through DOJ indictments―if not face criminal prosecution and conviction. The law’s enactment has also received strong public support from organizations, such as Transparency International (who was a key advocate for the act to pass in Congress) and the U.S. Chamber of Commerce, among others.

However, DOJ’s ability to enforce this law has come into question given the challenges with extraditing an indicted foreign official, especially in countries that do not have extradition treaties with the U.S. Nevertheless, DOJ has been successful in bringing foreign officials to U.S. soil to face their day in court under existing anti-money laundering and drug trafficking-related offenses. Recently, former Honduran President Juan Orlando Hernandez was extradited to the Southern District of New York to face drug trafficking and weapons charges.⁷ And even when corrupt officials are protected by their country’s lack of cooperation (or outright hostility) with the U.S., international coordination has entered the breach. For example, in 2023, Spain extradited former Venezuelan General Hugo Armando Carvajal to the U.S. for narcoterrorism and other drug trafficking-related charges.⁸ Although international enforcement can be difficult, potential corrupt actors should not disregard FEPA.

Financial Crimes and Organizational Impact

Similar to FCPA, the new law’s scope includes (1) U.S. and foreign publicly traded companies listed on U.S. exchanges, (2) U.S. persons and businesses and (3) foreign persons and businesses acting while under the U.S.’ territorial jurisdiction.⁹

For companies that fall within the scope of this requirement, collaboration should occur with key stakeholders, such as senior management and the three lines of defense. In addition, they should consider updates to their financial crimes and compliance programs through the following:

1. Policies and procedures:

Corporate anti-bribery and corruption policies and procedures should be updated to reflect compliance with this requirement. This can include a response plan describing actions that need to take place when bribe solicitations have been reported or are detected.

2. Training:

Red flag indicators should reflect foreign officials’ requests for bribes
Targeted training for employees who interact with foreign officials

3. Compliance program:

Organizations should consider implementing new or enhancing existing controls to ensure internal monitoring and reporting of bribe solicitations (not just violations under FCPA) from foreign officials while evaluating management information reporting requirements. This information could eventually be requested from DOJ given its own requirement to collect and report on FEPA data to Congress.

4. Review of whistleblower/ethics hotline:

Building upon training, employees and third-party vendors should be educated on identifying when they have been solicited for a bribe and the channels within the organization to report these violations. Leveraging an organization’s whistleblower/ethics hotline is now just one of many options employees and third-party vendors can use for escalation. Most recently, DOJ has announced its plans to implement its own whistleblower program to combat white collar crime, inclusive of foreign corruption cases not covered under the SEC’s jurisdiction.¹⁰

With these and any other changes, management should also set the tone from the top by communicating the significance of FEPA and the corresponding impact on the organization. These changes should not be considered a one-off update. Rather, organizations should continue to monitor FEPA guidance from DOJ and evaluate its potential impact.

Conclusion

It remains to be seen what cases DOJ will bring under FEPA, particularly under future administrations. Nevertheless, the law sends a strong message to the rest of the world that the U.S. will not tolerate bribe payments or requests and will actively pursue justice when violations occur.

Despite the protection offered to corrupt foreign officials, their international movements may be limited even after their time in office due to over 100 U.S. extradition treaties.

Organizations should consider this law as part of their financial crimes and compliance programs by reviewing their policies, procedures, training and control environment to ensure adherence.